Deflation vs. Hyperinflation

They’re currently doing their outmost best to convince us that hyperinflation is not going to be a problem, but that we can instead expect to go into a long period marked by deflation or a decline of prices due to lower economic activity.

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The truth of the matter is that while we might go into a period earmarked by a long period of declining prices, deflation can just be as bad as hyperinflation which will eventually turn up since deflation normally precedes periods of severe hyperinflation. Deflation means companies and businesses selling goods or services become less and less profitable as a drop in prices impact on their earnings which leads to job losses. In addition, consumers have the tendency to hold onto cash during periods of deflation in the hope that prices will drop further. This can lead to further job losses since it helps to slow down economic activity. An excellent article that discusses deflation and hyperinflation in much more detail can be read here.

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