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How Does Deflation Actually Happen?

Posted on October 12, 2008

Last week we looked at some historical milestones as we compared the events leading up to the Great Depression to what we re seeing now. While apples to apples comparisons are problematic due to vast differences in the way economic statistics are measured and reported, it is a much more simple matter to see the big picture. This week, we take a look at things from a monetary perspective. Perhaps one of the biggest misconceptions deals with deflation. How exactly is deflation (an actual shrinkage in the money supply, not falling prices) achieved? Conventional wisdom points to falling prices,...

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deflation , money supply