Deflation still at 5.9%

[mr_anderson]

Question for economic people: can you have deflation without a shrinking economy? Can GNP or whatever grow while prices go down?

Absolutely, through innovation and efficiency.
Think of computers, where prices have steadily fallen even as the economies are booming.

[Cassandra Syndrome]

Question for economic people: can you have deflation without a shrinking economy? Can GNP or whatever grow while prices go down?

Good question. Deflation is a symptom more than a force in itself. Its a bit like alcoholism as a sign of some underlining mental illness.

History has shown us that deflation coincides with recessions and depressions. Japan suffered deflation in the 1990s. The last time it was this bad here was the 1930s. The US had 25% fall in prices from 1930 to 1934.

Deflation can make people postpone purchases as they perceive prices falling in the future. The fall in demand forces prices down further. And becomes a vicious circle.

Deflation is good for savers but bad for borrowers so for this country it is a major anchor.

As an economy grows, people raise prices, interest rates increase, capital flows inwards and so on.

Deflation is like a low blood pressure reading from a person who is on life support in intensive care. (apologies for the analogy, but thats how seriously bad shape this country is in)

[bobbysands81]

what you are actually asking is:
can national income rise while the money supply falls?

the answer is No.

Are income's rising though?

My wages are down more than the rate of deflation - I'm happy I'm doing my bit.

[Cassandra Syndrome]

Absolutely, through innovation and efficiency.
Think of computers, where prices have steadily fallen even as the economies are booming.

We have had innovation since the first industrial revolution in the mid 1800s. The fall in prices coincides with the fall in costs and profit margins increase. The fall in prices in the area of innovation is always offset by the increase in prices of the traditional sectors as demand for them increases out of the new industries booming.

A little bit of inflation is always a good sign. Deflation is historical associated with recessions and depressions. People reduce prices not out of affordibility, but out of desperation.

[sandar]

defaltion is the result of too little demand in the economy so as an indicatorsits a disaaster. That there are benfits for the export market is true, as long as there is sufficient demand in your export markets, signs that things might be picking up for our trading partners are a positive on that side of the thing.
Howvere a combination of that demand and the inflaTION WHCIH A large national debt creates will mean higehr inflation soon enough

[zakalwe1]

Oddly enough you are incorrect. During times of great development you can have deflation and (real) growth in an economy but it is very rare.

If you look at growth in the computer manufacturing industry you will see because of the pace of development that there is deflation and growth in the industry but that's just one sector.

never happened so far so my answer to the question posed was correct.

your example, while correct, is only for an industry and not a country.

a country can increase its national income selling, say, computers which are falling in price, but it'd have to consume computers only to satisfy your scenario. and it could only increase its national income if it exported the computers. theoretical but never going to occur in a million years.

[Scorpio]

Question for economic people: can you have deflation without a shrinking economy? Can GNP or whatever grow while prices go down?

In 'real terms' definitely. Qatar on paper this year is going to shrink by something astronomical like 30/40%, all due to falling gas prices.
But in real terms, it's going to grow by somewhere between 5% and 10%.

Economic activity and the level of it is entirely independent of what euro symbols we put on it.

I've argued with someone on here about whether the entire 1870-1890s period was a depression (as I believe) or just a long period of growth without price rises (as s/he believes), so the idea of falling prices and rising activity has a long history!

[zakalwe1]

Are income's rising though?

My wages are down more than the rate of deflation - I'm happy I'm doing my bit.

unfortunately so am i.
25% from my 2007 levels. just behind the property market (and i'm not in the property game!)

[Scorpio]

unfortunately so am i.
25% from my 2007 levels. just behind the property market (and i'm not in the property game!)

On that, have you guys seen this poll yet?

Some initial results from it out today on where incomes are falling most: clue, not lowest paid in financial services - and the ICT sector is getting away easy!

[Seos]

And others say its precisely because we don’t have our own currency that we have a bigger problem within a deflationary cycle.

deflation within a currency union is self correcting.
The Irish Economy Blog Archive Deflation and Competitiveness

Is the argument that you're referring to that we could control our own interest rates?