Which is worse Hyperinflation or Deflation?
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  Which is worse Hyperinflation or Deflation?
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Author Topic: Which is worse Hyperinflation or Deflation?  (Read 8352 times)
TheDeadFlagBlues
Junior Chimp
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« Reply #25 on: April 23, 2014, 03:34:33 PM »

For sure I prefer deflation.  All things equal I prefer deflation over even small amounts of inflation.

jaichind's got money in the bank.
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jaichind
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« Reply #26 on: April 23, 2014, 03:52:09 PM »

For sure I prefer deflation.  All things equal I prefer deflation over even small amounts of inflation.

jaichind's got money in the bank.

Yes, I am a significant creditor so all creditor prefer deflation. 

But it is more then that.  It is also a function of the fact that I reached a point in my career where I am doing a good job at megacorp with high compensation where I can argue I am overpaid.  Since I am doing a reasonably good job my megacorp will not cut my pay but they could slowing have my compensation increase fall short of inflation as a way to adjust my compensation in line with my contribution.  Deflation or very low inflation would not allow them to do this to my benefit.   I am fine with any inflation below 2% although I prefer deflation from a compensation management strategy point if view.  Looking ahead, using inflation swaps, CPI is expected to be around 2% the next three years and around 2.5% over the next 10 years.  I could live with that as I am working toward semi-retirement 3-4 years from now when this concern about being overpaid would not matter anymore.
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Antonio the Sixth
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« Reply #27 on: April 23, 2014, 04:03:58 PM »

People are actually arguing hyperinflation is worse than deflation? My God this forum is full of morons.

Huh Hyperinflation is worse than deflation. This is not actually a remotely controversial position.

Deflation basically means economic depression. Hyperinflation might eat out most of growth, but it doesn't generally lead to the same lows.

Well, speaking purely about economies, would you rather live in 1990s Japan or 1920s Germany?

Sorry, Antonio, but--while I'm not an expert on the subject and could be misinformed by the economic education that I do have--I'm going to have to part company with you on this one.

Well, obviously it does depend on the degree of hyperinflation/deflation. Zimbabwe and Germany in the 1920s are the most extreme cases, but a more classical example would be Italy in the 1980s. Similarly, deflation can get worse than Japan's (although you certainly know far more than I do about Japanese history), as in the Great Depression.

Anyway, my apologies to everyone in this thread for having been so arrogant. I clearly not as good at economics as I thought I was, and I might well be wrong on this issue (though I'd like to be sure about that, if we can have a peaceful conversation).
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« Reply #28 on: April 23, 2014, 04:18:10 PM »

Hyperinflation doesn't just mean above average inflation. The standard definition used is at least a 50% increase a month.

Upon some research it appears Italy in the 80s had inflation at a rate of a bit over 20% a year. That's pretty bad, but not hyperinflation.
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World politics is up Schmitt creek
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« Reply #29 on: April 23, 2014, 05:08:57 PM »

For sure I prefer deflation.  All things equal I prefer deflation over even small amounts of inflation.

jaichind's got money in the bank.

Yes, I am a significant creditor so all creditor prefer deflation. 

But it is more then that.  It is also a function of the fact that I reached a point in my career where I am doing a good job at megacorp with high compensation where I can argue I am overpaid.  Since I am doing a reasonably good job my megacorp will not cut my pay but they could slowing have my compensation increase fall short of inflation as a way to adjust my compensation in line with my contribution.  Deflation or very low inflation would not allow them to do this to my benefit.   I am fine with any inflation below 2% although I prefer deflation from a compensation management strategy point if view.  Looking ahead, using inflation swaps, CPI is expected to be around 2% the next three years and around 2.5% over the next 10 years.  I could live with that as I am working toward semi-retirement 3-4 years from now when this concern about being overpaid would not matter anymore.

Oh, surely that's a fine set of reasons for you to prefer deflation, but this thread is trying to establish what's worse. That isn't all about you.
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Atlas Has Shrugged
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« Reply #30 on: April 23, 2014, 05:47:31 PM »

Hyperinflation (normal)
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BRTD
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« Reply #31 on: April 23, 2014, 07:10:47 PM »

Seriously anyone who says deflation clearly doesn't understand what hyperinflation is (and that's not uncommon, I've seen the Ford/Carter years described as having hyperinflation before, which is completely inaccurate.)
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Fmr President & Senator Polnut
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« Reply #32 on: April 23, 2014, 08:02:35 PM »

Sorry Tony, again I completely disagree with you on this.
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DC Al Fine
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« Reply #33 on: April 23, 2014, 09:40:33 PM »

I'm no economist, but couldn't deflation be cured by printing more money?

You need to get people/businesses to spend it. That's where the 'velocity' of money comes in. Printing money doesn't do much if it sits in chequing accounts for years on end.
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jaichind
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« Reply #34 on: April 24, 2014, 07:56:29 AM »

From a public policy point of view there are two types of deflation.  One I think is positive and one negative.

 There could be a case where a economy is going through rapid economic growth as well structural changes where the relative prices of different sectors are being realigned.  Because of the high productivity increases these relative price adjustments sometimes could take place with falling price levels in certain sectors which in turn mean very low inflation if not outright deflation.  Examples of this are USA in the 1870s-1880s and PRC in 1999-2006 where both had a deflationary boom.  I think there is nothing wrong with this and deflation is not something that hurts the growth of the economy.

Then there is the more familiar deflation situation where there is significant deleveraging after the bust of a credit boom.  Even with attempts to boost money supply via easy credit, it could not make up for the fall of credit due to deleveraging and leads to deflation.  Here the debt overhang of the credit boom becomes a greater burden as price level decreases which in turn leads to lower economic growth.  This is what took place in Japan starting in the mid 1990s and there is a risk of this in Europe today.  USA seems to have avoided this situation although it did have some deflation in 2009.

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Antonio the Sixth
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« Reply #35 on: April 24, 2014, 08:46:14 AM »

Hyperinflation doesn't just mean above average inflation. The standard definition used is at least a 50% increase a month.

Upon some research it appears Italy in the 80s had inflation at a rate of a bit over 20% a year. That's pretty bad, but not hyperinflation.

Ah, mine was a semantic mistake then. I had no idea hyperinflation was supposed to be so hyper.

If we compare things that are comparable (that would mean a -33%/month deflation or so, which of course isn't very realistic), deflation remains worse though.
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MurrayBannerman
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« Reply #36 on: April 24, 2014, 09:17:15 AM »

From a public policy point of view there are two types of deflation.  One I think is positive and one negative.

There could be a case where a economy is going through rapid economic growth as well structural changes where the relative prices of different sectors are being realigned.  Because of the high productivity increases these relative price adjustments sometimes could take place with falling price levels in certain sectors which in turn mean very low inflation if not outright deflation.  Examples of this are USA in the 1870s-1880s and PRC in 1999-2006 where both had a deflationary boom.  I think there is nothing wrong with this and deflation is not something that hurts the growth of the economy.

Then there is the more familiar deflation situation where there is significant deleveraging after the bust of a credit boom.  Even with attempts to boost money supply via easy credit, it could not make up for the fall of credit due to deleveraging and leads to deflation.  Here the debt overhang of the credit boom becomes a greater burden as price level decreases which in turn leads to lower economic growth.  This is what took place in Japan starting in the mid 1990s and there is a risk of this in Europe today.  USA seems to have avoided this situation although it did have some deflation in 2009.


Side note, but I'm expecting this to happen when we hit the renewable energy science right on the head.
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AggregateDemand
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« Reply #37 on: April 24, 2014, 10:31:06 AM »

Side note, but I'm expecting this to happen when we hit the renewable energy science right on the head.

Maybe. We don't have to wait on renewable energy though. Middle class decline is caused, in part, by America's proclivity for expensive vehicles with poor EPA fuel economy (trucks). We could have energy deflation and cheaper automobiles today by changing US automobile policy.
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True Federalist (진정한 연방 주의자)
Ernest
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« Reply #38 on: April 24, 2014, 03:36:49 PM »

Hyperinflation doesn't just mean above average inflation. The standard definition used is at least a 50% increase a month.

Upon some research it appears Italy in the 80s had inflation at a rate of a bit over 20% a year. That's pretty bad, but not hyperinflation.

Ah, mine was a semantic mistake then. I had no idea hyperinflation was supposed to be so hyper.

If we compare things that are comparable (that would mean a -33%/month deflation or so, which of course isn't very realistic), deflation remains worse though.

Except for bitcoins, and then only if you accept them as being a real currency, I don't think there has ever been an example of hyperdeflation.  Indeed, I fail to see how a broadly circulating currency could have such a thing happen to it.
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MurrayBannerman
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« Reply #39 on: April 24, 2014, 03:41:29 PM »

Side note, but I'm expecting this to happen when we hit the renewable energy science right on the head.

Maybe. We don't have to wait on renewable energy though. Middle class decline is caused, in part, by America's proclivity for expensive vehicles with poor EPA fuel economy (trucks). We could have energy deflation and cheaper automobiles today by changing US automobile policy.
I'm speaking of a revolutionary change.
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Del Tachi
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« Reply #40 on: April 24, 2014, 09:43:45 PM »

Would hyperinflation be a problem if GDP and wage growth were simultaneously skyrocketing?

Is such a scenario even possible?



Deflation just seems pretty bad any way you slice it. 

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Dereich
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« Reply #41 on: April 24, 2014, 11:47:46 PM »

Would hyperinflation be a problem if GDP and wage growth were simultaneously skyrocketing?

Is such a scenario even possible?



Deflation just seems pretty bad any way you slice it. 



It might be possible in theory if you had productivity doubling every month or something; either way wage growth would probably lag behind a bit because of stickiness. Even if it was possible, the menu costs associated with hyperinflation would make it impractical to continue.

And yes, deflation is usually bad. It gives incentives for suppliers to stop supplying (falling prices means falling profits and fewer producers) and consumers to delay consumption (why buy something now if you believe prices will be lower next month?). Usually that would add up to an anemic economy.
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ElectionsGuy
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« Reply #42 on: April 25, 2014, 01:23:45 AM »

Hyperinflation by far
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Beet
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« Reply #43 on: April 25, 2014, 05:44:41 PM »

Seriously anyone who says deflation clearly doesn't understand what hyperinflation is (and that's not uncommon, I've seen the Ford/Carter years described as having hyperinflation before, which is completely inaccurate.)

This.
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SPC
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« Reply #44 on: April 25, 2014, 05:53:43 PM »

Then there is the more familiar deflation situation where there is significant deleveraging after the bust of a credit boom.  Even with attempts to boost money supply via easy credit, it could not make up for the fall of credit due to deleveraging and leads to deflation.  Here the debt overhang of the credit boom becomes a greater burden as price level decreases which in turn leads to lower economic growth.  This is what took place in Japan starting in the mid 1990s and there is a risk of this in Europe today.  USA seems to have avoided this situation although it did have some deflation in 2009.

This indicates that deflation is a consequence of economic stagnation rather than a cause. Given that people inherently prefer present items to future items, mild deflation is not going to be a cause of economic stagnation. All things being equal, deflation will encourage saving over spending which increases the supply of money available for production. Mild inflation may be useful for increasing short-term spending but is counterproductive toward encouraging long-term investment.
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Hatman 🍁
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« Reply #45 on: April 25, 2014, 06:32:18 PM »

I'm no economist, but couldn't deflation be cured by printing more money?

You need to get people/businesses to spend it. That's where the 'velocity' of money comes in. Printing money doesn't do much if it sits in chequing accounts for years on end.

Easy solution: Give the money to poors. They have no choice but to spend.
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