Austrian Radicalism: Deflation is always and everywhere…GOOD!

Summary and conclusion (on why Japan should not fight deflation)

Contrary to the popular view, price deflation as a rule is always good news for the economy. When prices are falling in response to the expansion of real wealth, this means that people’s living standards are rising. When prices are falling as a result of the burst of the financial bubble, it is also good news for the economy, for it indicates that the impoverishment of wealth producers was arrested. The latest proposed Japanese policy to raise the pace of the monetary pumping in order to counter deflation amounts to furthering the economic impoverishment of wealth producers, thereby delaying any meaningful economic recovery from taking place.

One thought on “Austrian Radicalism: Deflation is always and everywhere…GOOD!

  1. I suppose by this logic we should have a financial crisis every year. We’ve been so much better off missing a compounded ~$15T of output since 2008, why not just do it again and again until there is only $1 left in existence for everyone to share.

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