Mises Institute/Mark Thornton/7-2018

“Apoplithorismosphobia (ay-pope-lit-horris-mos-foe-be-ah) is the fear of deflation. Or, more correctly, the fear that an economy would ‘suffer’ from falling prices, or a general decline in the prices of goods and ser vices. It is a fear that has gripped some economists, journalists, and policymakers with a blinding strength as powerful as faith. Evidence seems to suggest that the phobia develops from the inability to understand the causes of the Great Depression and a more general failure to distinguish between what Bastiat called “the seen” (e.g., deflation) from ‘the unseen’ (e.g., the causes of contraction and unemployment). Under the influence of this phobia, victims develop an unfounded faith in the ability of monetary and fiscal policy. In extreme cases it leads to the support of powerful policy ‘weapons’ to combat deflation—the equivalent of using economic weapons of mass destruction. As shown in the case of Japan, this behavior is counterproductive and should be considered a danger to society. The purpose of this paper is to describe and diagnose this phobia and to present a treatment to counteract its effects.”

USAGOLD note:  Deflation, believe it or not, can have its positive effects. . . . . .an argument to let-the-economy-be-the-economy from an Austrian economist and a clever writer.  Of course, doing so in a fiat money economy elevates the need for a gold hedge to an even loftier position (though the author never mentions the metal in his presentation).


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