Re:The Shock of Sweden's Housing Market Is Hitting the Count...
by JumpCrisscross on Wednesday November 15, 2017 @11:56AM
(#15705226)
Deflation means a drop in price levels, a systematic effect. Housing prices falling while consumer prices hold steady isn’t deflation. Deflation is scary because (a) it encourages capital to hold money over productive investments and (b) it is very difficult to fight. Deflation usually occurs once an economy is already at the zero bound of interest rates; no help there. You could monetise a bunch of fiscal spending, but that, too, has a bunch of nasty side effects.
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Re:The Shock of Sweden's Housing Market Is Hitting the Count...
by tom_mellior on Wednesday November 15, 2017 @12:57PM
(#15705914)
> Housing prices falling while consumer prices hold steady isn’t deflation.
We're both handwaving here, but Wikipedia says: "In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0% (a negative inflation rate)." https://en.wikipedia.org/wiki/Deflation
The inflation rate is given by a price index which typically includes housing. If housing prices fall while everything else holds steady, that index has nowhere to go but below 0%.
I realize that this is distinct from a systematic deflationary spiral that affects the entire economy. The point was, some people might only look at the inflation rate, see it's below 0, and start panicking and doing stuff to "prop up" prices instead of letting people profit from affordable housing.