Deflation? There hasn’t been any deflation in U.S. since 1953

The talk over the past couple of years has been the threat of deflation. The Federal Reserve, the European Central Bank (ECB), the Bank of England (BOE) and the Bank of Canada (BoC) have all warned that deflation is a real concern. You know who else aired their concerns about deflation? Keynesian economist Paul Krugman.

Here is what Krugman told CNN in 2011:

Well, his nonsensical ramblings have been proven unfounded yet again. The chart (via Economic Policy Journal) below suggests that there hasn’t been any deflation since 1953, and with the vast amounts of money being printed by the Federal Reserve, there likely will not be any deflation ahead. It’s all inflation, baby! Remember, this is what Krugman wants all along.

Price inflation is also rampant. We reported just on Monday that rent is soaring and tenants are having a difficult time making payments. Let’s also not forget about climbing food prices, healthcare costs and tuition rates. Where are the signs of deflation at all?

Besides, is deflation a bad thing? Your money is worth more and prices decrease. Here is what Jörg Guido Hülsmann, senior fellow of the Mises Institute and “author of Mises: The Last Knight of Liberalism and The Ethics of Money Production,” writes:

“The deflation-phobia of our elites is therefore the rational reaction of those who profit from the privileges that our present inflationist regime bestows on them, and who stand to lose more than any other group if this regime is ever reversed in a deflationary coup. Perennial inflation is based on monopoly. Deflation brings in the fresh winds of the free market. True elites would welcome deflation for precisely this reason, because they owe their leadership positions exclusively to the voluntary support of other members of society. They have nothing to fear from deflation – a shrinking money supply – because their leadership is grounded on the useful entrepreneurial services they provide to their fellow citizens – services that would subsist through any changes in the money supply or in the price level.”

The idea that consumers will postpone their purchases waiting for prices to fall further is an asinine comment. If someone wants bread, they’re not going to wait three years for a loaf to fall 10 cents. If a family wants to buy a new sofa because their current one has fallen apart, they’re not going to wait until the kids are grown up to buy the piece of furniture.

Inflation is the evil that is promoted by the political entrepreneurs, the central planners, the big government economists. Deflation alleviates the problems brought about from Federal Reserve-induced inflation.

Remember, deflation was a huge part of the greatest growth in the U.S. throughout the 19th century (1820 to 1850 and 1865 to 1900). During these times in U.S. history, prices were slashed in half, but people still consumed, invested and saved.

Sound money and low prices? Who wouldn’t want that? Perhaps Krugman becomes terrified whenever he sees Wal-Mart have a rollback promotion, or if a corner store has a sale of 25 percent off. How dare businesses lower their prices!

With zero fractional reserve banking and zero central banks, the national or global economy would enjoy the gentle breeze of deflation.

–AM