Subject:
deflation In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the annual inflation rate falls below zero percent (a negative inflation rate), resulting in an increase in the real value of money – allowing one to buy more goods with the same amount of money. This should not be confused with disinflation, a slow-down in the inflation rate (i.e. when inflation decreases, but still remains positive). As inflation reduces the real value of money over time, conversely, deflation increases the real value of money – the functional currency (and monetary unit of account) in a national or regional economy.
Currently, mainstream economists generally believe that deflation is a problem in a modern economy because of the danger of a deflationary spiral (explained below). Deflation is also linked with recessions and with the Great Depression, as banks defaulted on depositers. Additionally, deflation also prevents monetary policy from stabilizing the economy because of a mechanism called the liquidity trap. However, historically not all episodes of deflation correspond with periods of poor economic growth. (Wikipedia Jan 2010)
Arguments for inflation
By John Schroy, on March 13th, 2009 | 
This article is in response to a reader’s comment as to the future of US housing prices. Specifically, whether residential prices will rise 30% by August 2015. I argue that this is essentially a question as to whether the Obama administration will lead to continued deflation or a return of inflation.
I present a series of arguments for predicting inflation and consequently the revival of residential real estate prices by 2015. Basically it comes down to the declining political fortunes of Barack Obama intersecting with the excessive spending habits of the Pelosi-Reid Congress.
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