Terms

Deflation

Deflation is a general decline in prices for goods and services, typically associated with a contraction in the supply of money and credit in the economy. Usually associated with a contraction in the supply of money and credit, it can also be driven by an increase in productivity and the abundance of goods and services, by a decrease in total or aggregate demand, or by a decrease in the supply of money and credit. As it often signals an impending recession, what comes after are declining wages, job losses, and big hits to most investment portfolios.

Deflation Drivers

  • Poor Demographis
    • Reduced population or reduced population growth rate (less people = less economic activity)
    • Aging population (old people spend less)