We have to begin with the reasons of the deflation. Economical crisis could be one of them. During economical growths - inflation is rising, because people are not afraid to spend money - they know that if they lost their job - they would be able to find a new one. When a country is facing recession or stagnation, the society is trying to avoid any unnecessary expense. Another reason of deflation could be also to low money issuing . Less money on the market - the higher value of it. Also a foreign debt could be a serious reason of the deflation - Japan was facing that problem for over 20years.
Now let's focus on the effects of deflation. Starting with the positive effect(at least for the most of us - consumers) - our wages are worth more, so we can buy more commodities for the same amount of money. It seems nice, but on the other hand - producers pay the same money for their employees, but get less money for their products, because the society is waiting for bigger drops of prices. That process is leading to the recession and impoverishment of the whole country.
As we could see in the past deflation could be the reason of the serious economical crisis for whole countries. Japan has been is facing stagnation since the beginning of 90s, because of that process. We can also add the Major Deflation in U.S. in years 1818-21, or the situation after the Great Depression in the 30s. United Kingdom, Ireland and Hong Kong were also facing huge economical problems because of deflation.
Economical experts agree that the best situation for the national economy is low inflation(about 1%), because it's great convenience for further economical growth. Our government will have to stimulate consumption and convince people to spend their money. What's your opinion about deflation ? Is it dangerous process for our economy ? I'm waiting for your questions and opinions.
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The deflation is neither good nor bad. It is good for us as customers but bad for products. Many companies may have problems with solvency to employees and contractors. Economists says that nothing will change in next half of year or maybe even later. Prices are falling down every month. But seeing GUS statistics prices in 2014 has not changed. However this is the first time in 10 years we did not have to deal with increase in duty on alcohol and cigarettes.
ReplyDeleteDeflation is considered more dangerous than inflation phenomenon. The effects of deflation are much more severe than the effects of inflation. Deflation means that in the economic system there is no money. A small amount of the payment means that falling domestic demand, which decreases consumption. Stocks manufacturers grow, requiring lower prices for goods and reduce production. Further, if the producers sell their goods at lower prices, obtain worse results in gains and to compensate for the lower income, cut production costs and reduce the wages of workers or limited employment.
I agree with my opinion with Karolina Wieczorek.I agree with Karolina Wieczorek. I think that sometimes it depend on point of view. For customer is is good but generally it is bad for the nation.
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ReplyDeleteIt is not easy for me to relate to the subject because I am not an expert on economy, plus it is 1:50 a.m. and I just finished writing my engineer thesis – it is not the best time for this kind of dispute ;)
All I can say about the topic: this trend may be growing because as the economy is getting worse (as it has been getting since the fall of 2008) people tend to freeze their assets in "safe stuff". Keeping cash on the bank accounts is not a good idea - people are investing in real estate market or gold – that decreases the amount of money flowing and boosts the process of deflation.
In my opinion inflation and deflation isn't good or bad, but more important is how government is managing it, because depends on managing style it can be good or bad for people. For example in our country we can see bad managing style, because inflation and deflation are used to withdraw money from our pockets. In fact inflation in our country is hidden form of taxation and deflation is a bugbear to allow to tax citizens with inflation. In healthy system inflation and deflation managing style should look different.If you want learn more about inflation and deflation you should definitely watch this two videos: video1,video2.
ReplyDeleteTo be honest, my knowledge in this subject is far too low to say anything constructive. Generally, I prefer to trust experts (economists in this case) when it comes to evaluting mass-scale phenomena and their economical effects. I believe their expertise is much more valuable than mine :)
ReplyDeleteReading this article I broaden my view of what deflation is. I must say I'm little afraid of these subjects, but sometimes it's good to know more about economy.
ReplyDeleteLast deflation in Poland was noticed in the 70s, that's intereseting. I don't think that deflation is good, maybe for some time from a customers' perspective. However, this year there's a possibility of rebound effect. I'm curious about result of the current situation.
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ReplyDeleteI do not think it is worthwhile to consider these matters. deflation in our country was caused by a leak "phone hacking scandal" after which the Polish National Bank did not print more money. Stealing money from OFE also had an influence. In subsequent years, we will observe the phenomenon of inflation.
ReplyDeleteSome people call inflation a "hidden tax". Some times inflation is driven by banks like it was with Swiss Franc. I think we should all learn about macro economics in school because it is not that difficult. This could prevent crisis in future.
ReplyDeleteDeflation has its advantages and disadvantages because, from one hand, it informs us that our banks grant less and less loans. Because it is banks currently create money in the economy, meaning – the inflation. Or maybe it is people became wiser and take less loans?
ReplyDeleteAt present, inflation for us is another tax because banks create money on which they earn enormous sums and we are who pay for all that. I consider that the state should create money in certain amounts and not private banks. Then the problem of deflation would disappear.
As it was mentioned in the article - deflation is often the start of the serious econimic crysis. On
ReplyDeletethe other hand - we are paying less for many consumables like food, entertaiment etc.
It's really hard for me to decide, if it's good for our economy, or not. I'm not economist, so I won't
find smarter answer for that question.
To be honest I don't know too well for such things. On the other hand I know that if deflation will last a long time that consumers will have a better life. Therefore, I believe that it is possible that for me deflation would be a good thing. But there is certainly a lot of bad things that go with it. It's hard for me to talk about it.
ReplyDeleteOk, I like topics like these. there is no right or wrong. Bot inflation and deflation is bad. On one side it's bad for the country, on the other bad for people and on the third side (wut) it's bad for the market itself. We (the consumers) would love to pay less for things. Sure. I know i would. Companies/bankers that are here, would like something different. Problem for Poland arises because we don't really produce anything that a regular Joe buys. TVs, computers, telephones, cars, building materials, nothing. Even banks are not ours (one exception, for now at least)
ReplyDeleteIt's more of a vicious circle. We spend money, inflation rises, we save our money, deflation rises.
We're all just muppets in the hands of bankers.