The prospect of prices falling is terrifying the central banks especially the European Central Bank and the Federal Reserve. The collapse of the crude oil prices may signal the start of deflation in the global economy. But why worry? Aren’t falling prices good for the consumers. They will have to pay less for the same basket of goods. Economists are not happy with the prospect of falling prices and say deflation or falling prices are not good for the economy. On the surface, everything getting cheaper sounds like a dream come true. It’s not. The prospect is so terrifying that it’s prompted central bankers around the industrialized world to pour trillions of dollars into their economies to prevent a sustained drop in prices. The European Central Bank is projected to follow suit with an announcement as soon as Thursday.
Watch this video below that explains what is deflation and what it means for you as an investor!
This is another good video that explains deflation!
This video explains what is a deflationary spiral.
This video explains who benefits from deflation!