The word "deflation" has a bad connotation, conjuring up images of depressions and cataclysmic financial turmoil. But this isn't always so, according to author Chris Farrell. Yes, there are "bad deflations" resulting in the suffering of the magnitude of what happened in the 1930s and what has been occurring in Japan over the past decade; but there are "good deflations" too, where lower prices stimulate economies rather than seeing them stymied by lower prices. For example, in the 19th century when falling prices was a common theme, the standard of living went up precipitously. This book quite clearly explains both phenomena, from a writer with extensive experience in the popular business press at BusinessWeek and as a financial commentator on National Public Radio's "Sound Money" and "Marketplace."
He makes no bones about the fact that the world's markets are currently tending towards a deflationary environment. He bases this assertion on "three fundamental changes dating back to the late 1970s and early 1980s, (1) the embrace of market capitalization at home and abroad; (2) the spread of information technologies; and most importantly for understanding of the next half century, (3) the triumph of the financier."
Throughout the book he references extensive market research and historical precedent to make his points. One additional interesting theme he presents is that with businesses so focused on dealing with inflation for the past thirty years, the current professionals in the field have had little intellectual preparation to respond to a world market economy facing the opposite pricing trend. This book provides a useful guide in better understanding this phenomenon.
With so many commentators taking a dim view of lowering price trends, Mr. Farrell's view is a refreshingly different take indeed.