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Deflation – Living in a World of Falling Prices

North America’s only enduring bout with deflation was in the Great Depression of the 1930s, a lost decade of economic hardship, high unemployment and falling prices.

While there’s no immediate worry that we’re headed there, the debate has heated up as Europe copes with deep recession and a banking system on the brink. Even the U.S. is struggling after four years of weak growth.

Deflation is a prolonged period of falling prices with a downward spiral that tends to pick up momentum as it goes. As prices fall, consumers put off purchases in anticipation of even lower prices, which undercuts demand for products. This leads to less production, which leads to layoffs and downward pressure on wages and ever-lower prices.  Read More…

Replies to this Post

  1. Easton

    I agree, although Canada hasn’t suffered as much as the rest of the industrialized world we are starting to show the cracks of experiencing the same pains.

    We are a connected world and so when others suffer we are bound to feel it too eventually.

  2. Arsenio Carnan

    No wonder i see an upsurge of people visiting Dollar Stores. I think that is where the new business is. Invest in them.

  3. Darrius M.

    Avoid gold is the best advice this article gives. History shows it always drops during very bad recessions. But the sad thing is if you turn to Fox News you see them still hawking it as if its the great savior. Dont be fooled.

  4. Reinaldo Martinez

    BoC interest rate is already at a staggering low of 1% and so if we decide to cut rates more to stimulate the economy it will not be enough to spur people to borrow since it is already too low. I think we are in for a newer troubles 🙁

  5. Kalem

    Hmm, not sure i fully agree that avoiding stocks and funds is risky in the long term. In the long-term it will likely benefit you. In the short term it will definitely see-saw (up and down) but in the end it is still a good investment. Assuming you are careful in what you invest into.

  6. Jye

    Very good read. Deflation is no joke and can turn ugly very fast if left unchecked. This is why i have pulled my stocks and decided to put it in the safer bonds field. I am happy i did.

  7. Estevan

    My small business had to layoff several of my workers because we arent doing as much business these days. People are buying.

  8. Briley Hacker

    Now i know what deflation means.
    Thanks 🙂

  9. Benedict Brunner

    Yes Canada didn’t suffer as badly but i still think its an illusion. Our banks may have been weathered due to strong and smart regulation but it is only one angle to how we can still feel the ills of the rest of the world. And here is one of them.

  10. Kegan

    It’s funny how all this started with the US greed and their financial collapse. Ah well.

  11. Finn V

    Now the real question is how can i short sell and make some money off this deflation fiasco 😛

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