Deflation

If you sit around with old men like I do on a daily basis you will hear remarks like, I bought my first house for $15,000 or I remember when cigarettes were 25 cents a pack or when gas cost 20 cents a gallon. What these men are pointing out is that prices always rise over time and that is a good thing. The Fed sets a target of 2% inflation. If prices fall that is deflation as Japan experience for what is called their lost 30 years which began in 1990. In 1995 their GDP was $5.5 trillion and by 2025 it had fallen to $4.2 trillion. When someone running for office tells you they are going to lower prices, beware. First off ask them how they are going to do that. What happened in Japan can happen in any free market society. Japan suffered the "lost decades" primarily due to the collapse of its asset bubble in the early 1990s, which led to a severe and prolonged recession, banking crisis, and deflationary spiral. The bursting of the bubble, caused by over-inflated stock and real estate prices, left businesses with massive debt. Lowering prices is now referred to by the euphemistic term affordability and this will confuse many voters. The price increases that happened in the Biden years will not go away unless deflation sets in. The goal at this point is to hold inflation to two percent and that can be done but it will not be easy as trillions come in from foreign investors. While this is bad, inflation caused by private investment is not nearly as harmful as inflation cause by government investment.