Last Updated on June 10, 2022 by freewarespace
- Deflation is falling prices of commodities in a lasting and continuous manner
- Deflation is the opposite of inflation where prices go on soaring relentlessly with no signs of taking the reverse route.
- Deflation gives the money in the hands of the consumers more purchasing value.
- Wage reduction is a feature of deflation. In other words, employees have lesser purchasing ability.
- Deflation increases unemployment as the employers resort to large scale retrenchment occasioned by reduced consumption and production.
- Market sees less money circulation.
- Industry and business see less money infusion.
- Banks and financing institutions search for borrowers and the funds lent by them are always going to be less due to the rising intrinsic value of money.
- Industry and business become sick because of lesser demands for products.
- Banks get less money for lending purposes.
- Value of real assets and liquid assets like gold, diamonds, etc. Decline rendering it difficult to dispose them off.
- If money circulation remains static and population goes on increasing, the per capita share of money becomes less, but more valuable.
- A deflationary situation sees interest rate cut in deposits and advances.
- The central government of a country may come forward to reduce corporate and individual taxation so as to make more money available in the market for industry and business to make some headway.
- Government spending should increase on infrastructure, health care and education particularly and in all other public and corporate-interest areas selectively.
- The last two points are my suggestions, but those may not be construed as remedies as they may or may not work.
