The Myth of “Good” Inflation and “Bad” Deflation

The myth that inflation is a “good” thing has become quite deeply entrenched over the past decades. Its proponents insist that it indicates a high level of consumer confidence and demand. At the same time, they also argue that deflation is extremely dangerous, because it significantly reduces the ability of borrowers to service their debt. This myth is directly linked to another myth that consumption is the engine of economic growth. The roots of  both myths can be traced back to the 1980s. This was the time when the world economy saw the launch of widespread financialization that supported debt-based…...