Post #2974500

Important to distinguish two types of deflation from each other. Type one is the deflation that is caused by contraction of the money supply. In the current system if the M2 aggregate shrinks it causes deflation. Slowing economy causes bankruptcies which cause shrinking of M2 which looks as a deflation and forces more slowing down of economy as money gets scarce. Central banks inflate money supply to fight this kind of deflation. If you are not rich already, you will never see any money from these money bags. Type two deflation is natural and happens organically with progress. We saw natural deflation for years in electronics, where it beated the inflation targets by central banks. And prices of electronics were going down in the whole sector without disturbance. Savings allows you to eventually buy more efficient products.