Ugh. I think I've gone over this a half-dozen times in the past two weeks. But we've been discussing simple models to help explain some basic dynamics of economics, to see what's being argued about our current recession, and it keeps getting confused in the discussion here with the idea that there is some kind of simple but complete description of what's happening. There is not. It's just a model that helps explain the forces at work. We've actually had some deflationary spirals but not since the 1930s in the US. Nobody wants to see another one.
If you have a real interest, let me suggest something better. First, don't start off by thinking inflation or deflation is "good." As I said above, inflation is very bad. Deflation can be worse. d8-) Most central banks around the world would like to see 1% - 2% inflation for several technical reasons, the most basic of which is that is provides a cushion against the threat of real deflation, which, if it happens, strips the central banks of their ability to prevent further swings through monetary controls. That's the big fear, and we've just lost a fundamental monetary control of our own economy because the lowest interest rates just dropped to zero last week. That's not to say there aren't other controls, but they aren't the gentle tweaking type. Oh, and it's predicated on the fact that a zero rate of inflation or deflation, although utopian, doesn't last for long in the real world. Like maybe an hour or two at a time.
But what's been talked about here is not runaway inflation, or a decrease in inflation rates that's better called "disinflation," rather than "deflation." Good flips to bad, and vice-versa, in a real hurry in real economies.
This is why economics is a killer subject. I don't know what you know about it, but it requires an understanding of some basic models to begin to understand it. Let me suggest that you go to Wikipedia and look up "deflation." They do a pretty good job; not a great one, but it's pretty well tempered with the necessary caveats.
Then look up the "IS/LM" model in the same place. This is a useful model to see what economists have been arguing about for the past 70 years. It's no longer considered to be a valid description of how our economy works, but you have to know this model to understand what the arguments are about.
These are two fundamental things that are taught in undergraduate economics. They go a long way toward helping to understand the arguments and schools of thought. But they won't give you many answers. They'll just help you to understand the arguments.
Ok?
-- Ed Huntress