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DeflationThe opposite of inflation, deflation occurs when an economy experiences a sustained decline in the price of goods and services. While deflation can sound like a good thing, it can actually be worse than inflation, as consumers may become accustomed to lower prices and feel less inclined to spend money on items that might be cheaper the next day.
Economists identify deflation by examining negative inflation rates using tools like the Consumer Price Index. Shocks to either supply or demand can reduce consumer demand overall, leading to deflation. For instance, when consumer demand is low, it can mean people have less money to spend.
Deflation can also be particularly harmful to people borrowing money, because it increases the real value of their debt and makes it more expensive to repay.
Economists are wary of deflation in part because recessions have historically accompanied it: The United States last experienced a period of deflation during the Great Recession.Explore Deflation
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Switzerland's currency is so strong that it could cause deflationEconomic instability in the United States in 2025 strongly benefited Switzerland, where the value of the franc relative to the dollar increased by about 12.7%. In response, the price of imports dramatically decreased, making goods overall much cheaper. CNBCJapan's 1990s deflation followed the country's fastest growth periodThe end of World War II ended Japan's isolation in the global economy, prompting what's now called the "Japanese Economic Miracle." From the 1940s to the 1980s, Japanese policy makers enacted ultra-loose monetary policies that pushed a ton of cash into the market and fueled rapid growth. But these policies ultimately helped create a bubble and sent the country into a deep period of deflation. Patrick BoyleArtificial intelligence might make companies too efficient—which could trigger deflationAI innovation will likely decrease costs for companies and lead to a large increase in supply. That dramatic increase could conceivably bring prices down but keep supply high. However, AI's real impact will likely be complicated by its impact on human labor and the cost of new technology. ForbesTechnological advancements are historically deflationaryTechnological innovation can drive down costs and prices for businesses, which can increase real wages for employees. As a result, people have more money to spend and demand increases. World Economic ForumCOVID-19's shock to employment rates sparked some economists to fear deflationCOVID-19 simultaneously disrupted the supply chain and the labor market. Since the unemployment rate had hit record highs, some economists were worried that the supply chain would recover before the labor market. If that had happened, businesses would have been producing goods, but no one would have been able to buy them because they wouldn't have the disposable income to do so. NPRRead former Fed Chair Ben Bernanke's 2002 speech about preventing deflationVery low inflation rates in the early 2000s in the United States and a worsening recession in Japan sparked some domestic concern over the threat of deflation. While Bernanke wasn't Chair at the time of the speech, he emphasized the Fed's role in preventing deflation. Federal Reserve Board'Good deflation' happens when prices naturally track with supply, meaning prices change graduallyThis tends to make products and services more affordable and normalizes the standard of living. Bad deflation usually happens when there are sudden changes to either supply or demand.
Near-zero [interest rates helped create the real estate bubble that sparked the Great Recession when it crashed](https://www.youtube.com/watch?v=LMo9mD8j7IA&t=91s)
Because deflation distorts the value of money, deflation is particularly harmful for borrowers. Low interest rates made it easy for businesses and everyday people to take on enormous debt, which exacerbated the effects of the recession. Foundation for Economic EducationThe Great Depression is one of history's most notable periods of deflationThe stock market crash of 1929 helped trigger a period of deflation in the United States by creating a drastic decrease in the total money supply. Because of the United States' central role in the world economy, virtually every single country was impacted by the recession. Casual EconomicsThe psychological aspect of deflation makes it difficult for policymakers to stabilize the economyThat psychological aspect is referred to as "the deflationary spiral." When prices start decreasing, people tend to hold on to their money to pay the lowest prices. But as prices start stabilizing, people resist increasing prices. (Some users may experience a paywall.) The AtlanticInflation was a word before deflation wasThe word inflation has Latin roots and technically means an influx of air, first appearing in the English language in the 1890s to describe bike tires. Deflation's first known mention in an economic text was in 1919. BBCFalling demand and lower costs of production cause deflation"Falling demand" refers to anything that changes someone's willingness to spend money on goods and services. Global recessions, fears of a worldwide recession, and a fall in the money supply are all factors that could lead to falling demand. Likewise, lower production costs allow companies to increase production, which can lead to a surplus in supply. Economics HelpEconomists define deflation as a sustained decline in prices across an economyDeflationary periods are characterized by broad, significant price declines. The Federal Reserve can monitor deflation by tracking prices through price indexes, such as the Consumer Price Index (CPI), which characterizes the average costs for consumers each month. Corporate Finance InstituteThe world's most famous case of deflation happened after Black ThursdayWhile the details are not fully agreed upon, many economists point to the Federal Reserve's tightening of the money supply as a prime culprit, leading to a significant deflationary spiral. Visual CapitalistDisinflation, a decrease in the rate of inflation, is different from deflationDisinflation happens when prices are still going up, just at a slower rate. Prolonged disinflation is also often accompanied by a recession, making it painful for consumers. Federal Reserve Bank of St. LouisHow one trial tested the limits of satirical musicThe rapper Afroman, who earned jokey hits in the '90s with songs like "Because I Got High," was taken into court by police officers by police officers in Adams County, Ohio, who alleged that he'd defamed them in his songs. The music in question was recorded after those officers raided his house and satirized the situation, often in graphic terms. The rapper beat the case, but not before his satirical songs were analyzed in court. NPRNot all speech in the United States is protectedThis page explains the categories of speech—including defamation, incitement, true threats, fraud, and obscenity—the Supreme Court has placed outside First Amendment protection and how courts determine which standard to apply when speech is challenged. Except for Mercury, every planet in the solar system experiences aurorasLacking magnetic fields, Venus and Mars exhibit auroras when the solar wind collides directly with their atmospheres, without deflection. Some particles behind the atmospheric collisions that generate auroras on gas giants come from their moons and the surrounding environments. BBC Sky at Night MagazineWhat is quantitative easing?Quantitative easing was a relatively new method the Federal Reserve used to curb deflation during the Great Recession. In this process, a central bank digitally creates money that is used to purchase assets, usually government bonds. This lowers returns on low-risk bonds, encouraging investors to put their money in high-risk, short-term stocks, and moves money through the system. The TelegraphWhat are repurchasing agreements?Repurchasing agreements are short-term trade agreements in which a dealer sells securities and agrees to repurchase them at a higher price soon after (often within 1 to 2 days). This gives dealers quick access to cash and allows the purchasing party, often the Federal Reserve, to control liquidity in securities. This can be used to alter the money supply, which is a key element in combating deflation. The Plain BagelAt one point, the land underneath the Imperial Palace in Japan was reportedly worth more than CaliforniaBefore Japan's economy crashed and sent the country into two decades of deep deflation, the real estate market was experiencing euphoric highs. The Imperial Palace never actually went on the market, so it's difficult to actually compare the value to California. ColdFusionChina had an inflation rate of -0.4% in August 2025As opposed to other G20 countries that are largely struggling with high inflation rates, China is facing deflation. Sluggish growth in the country's once booming real estate market is just one glimpse into the consumer slowdown triggering deflation. Visual CapitalistThe Federal Reserve can set interest rates below zeroInterest rates, the cost of borrowing money, are the primary tool the Federal Reserve uses to control inflation. During periods of deflation, setting interest rates below zero penalizes saving, encourages banks to lend more and moves more cash through the economy. International Monetary FundThe 'Harbaugh Bowl' marked the first Super Bowl coached by brothersIn Super Bowl XLVII, brothers John Harbaugh and Jim Harbaugh faced off, with Baltimore defeating San Francisco 34-31 in the first sibling matchup in Super Bowl history. NFL ThrowbackFaithless electors have never changed the outcome of a US presidential electionOccasionally, Electoral College members vote against their state's popular choice—known as "faithless electors." Though these rare defections have drawn attention and prompted new state laws, none have ever altered the final result of a presidential race. Federalist SocietyThe US Constitution grants protection for satireThe First Amendment protects satire, though it does not protect defamation. The key distinction is that satire—evident by its hyperbolic language and comedic portraits—is not intended to be believed, even if it's being malicious. Middle Tennessee State UniversityDelays in the decay of unstable particles provide evidence for time dilationPhysicists used the muon half-life measured in labs to predict how many should reach detectors on Earth's surface after their production in collisions between atmospheric molecules and cosmic rays. Higher detection rates were consistent with a longer half-life due to slower movement through time. University of VirginiaTime dilation explains that movement through space affects the passage of timeAccording to special relativity, everything in the universe moves through space-time at the speed of light. Just as turning from north to northwest on a road reduces one's northward motion, moving through space leaves less of this speed to move through time, causing an object to age more slowly. Live ScienceThe extreme precision of atomic clocks magnifies gravitational time dilationScientists at the National Institute of Standards and Technology have constructed clocks made out of stacked strontium atoms, which show differences in the passage of time across just a millimeter of height consistent with predictions from general relativity, where atoms closer to Earth's center tick off time more slowly. National Institute of Standards and TechnologyA 1919 eclipse validated general relativity and made Albert Einstein a celebrityAccording to the theory, starlight should deflect around massive objects due to the warping of spacetime light travels through on its way to Earth. Comparing the locations of stars behind the Sun during the eclipse with their positions at night showed deflections that popularized Einstein's model. VoxGPS satellites are programmed to account for their faster passage of time in spaceThe Global Positioning System relies on signals from satellites to calculate locations on Earth by measuring time and distance. However, their orbits, being farther from Earth's center, cause them to experience less gravitational time dilation. These systems would be off by 11 kilometers per day without relativistic corrections. minutephysicsSpace-time changes its shape and our perceptions of reality to maintain light's speedTo preserve the speed of light for all observers, the universe sacrifices the uniformity of space and time through the phenomena of time dilation and length contraction. This means that individuals may disagree on measurements of time and space based on their motion or location in a gravitational field. Symmetry MagazineAccording to general relativity, gravity is technically not a forceForces are traditionally viewed as interactions that cause accelerations, such as the force between two magnets pulling them together or pushing them apart. General relativity reframes acceleration by describing motion along the curves of spacetime as natural, and only deviations from those paths require forces. FermilabIBM’s supercomputer Deep Blue beat Garry Kasparov in 1997After defeating IBM’s Deep Blue in 1996, world champion Garry Kasparov lost their 1997 rematch 3½–2½. The match was a milestone in artificial intelligence, marking the first time a computer beat a reigning world champion. BBC NewsExposed concrete led to oxygen depletion within Biosphere 2Instead of being absorbed by plants through photosynthesis to produce oxygen, significant amounts of carbon dioxide were taken up by the calcium hydroxide in the concrete, trapping the oxygen in calcium carbonate and water. This concrete was sealed before the start of the second B2 mission. DestinyExplore an interactive map of the world's water gapsHumans extract 4,000 cubic kilometers of water from natural systems annually—eight times more than a century ago—creating regions where freshwater demand surpasses available reserves. The depletion of shallow aquifers has driven tapping into deeper, nonrenewable ones, threatening ecosystem sustainability. National GeographicVisual Capitalist shows the top 50 countries by central bank reservesAs of 2024, China, Japan, and the United States held the top three spots in terms of the value of their respective central bank reserves. Visual CapitalistCooling each square foot of a room requires at least 20 BTUs of capacityBritish thermal units describe the cooling capacity of air conditioners, though noise levels, directional airflow, and filtration also affect their effectiveness. Insufficient BTUs are unlikely to cool a large enough room faster than the environment warms the air. WIREDErnest Rutherford's gold foil and nitrogen experiments revealed nuclear structureObserving high-angle deflections when alpha particles were fired at gold foil led to an atomic model with a dense, positively charged nucleus. Firing those particles at nitrogen resulted in the emission of hydrogen nuclei—protons—leading to the discovery of the subatomic particle. CERN CourierCathode rays are beams of electrons that emit light when hitting a fluorescent screenWhen these beams are emitted into an evacuated tube containing charged plates or a nearby magnet, deflections are observed due to the electron charge. In 1897, J.J. Thomson's calculations of this deflection led to his discovery of the subatomic particle. Simply ScienceThe movement of seismic waves reveals the structure of Earth’s interiorChanges in temperature, density, and composition alter the path of primary and secondary waves, impacting where they are detected along Earth’s surface. These deflections create shadow zones 104 degrees to 140 degrees away from the epicenter, where no waves are directly detected. SciencePrimerNiagara Falls helped decide the battle between AC and DC power In the 1890s, Niagara Falls became the proving ground for alternating current (AC) when Tesla and Westinghouse built the first large-scale AC hydroelectric plant—defeating Edison’s push for direct current (DC) in the US electrical system. HISTORYThe structure of the Bullet Cluster cannot be explained without dark matterIn gravitational lensing, mass bends spacetime, deflecting passing light rays. Instead of this deflection being strongest near the gas within galaxies, where visible matter is densest, lensing is strongest in front of the collided galaxies. This suggests the presence of clumps of dark matter that were not slowed by friction during impact. Big ThinkPlastic's history began with an inventor seeking a $10,000 prize offerIn 1869, the first synthetic polymer—celluloid—was created as a substitute for ivory in billiard balls. It became the historical catalyst for the eventual manufacturing of plastics everywhere as an alternative to the depletion of other natural resources, including tortoiseshell and horns. Science History InstituteResearchers use the brain's ability to edit memories to explore memory deletionScientists have successfully implanted false memories in mice after studying how the editing process works in the brain. Beyond potentially deleting memories in those with PTSD, upcoming research may allow clinicians to forecast the onset of neurodegenerative diseases. National GeographicExplore important free-speech cases with a First Amendment litigatorHosted by Ken White, the "Make No Law" podcast explores landmark First Amendment cases—from student speech to defamation—breaking down complex legal battles in an accessible way for lawyers and nonlawyers alike. Legal Talk NetworkFIFA was formed in 1904 and held its first tournament in 1930In 1930, the first World Cup was held in Uruguay after the Olympics refused to allow professional soccer players to play in the 1932 games. The host country made it to the final of the 13-team event, playing against Argentina. Watch this remastered film of the 1930 match with Uruguay defeating Argentina 3 to 2 in front of 68,000 screaming fans at the newly opened Estadio Centenario. YouTubeUnderstanding time dilationThe faster you go, the slower time ticks for you. And the stronger the gravitational field acting on you, the slower time ticks for you. These phenomena – collectively called time dilation – were first explained by Albert Einstein’s theories of general and special relativity. In this 11-minute video, beloved astrophysicist Neil deGrasse Tyson explains them to comedian Chuck Nice. StarTalkThe Federal Reserve targets 2% inflationIt’s an arbitrary number originating from an offhand comment made by a New Zealand policymaker. The real objective is to maintain predictable prices for businesses and families to plan around while avoiding the dangers of deflation. Council on Foreign RelationsNeural networks are modeled after an idealization of the brainThese networks—including the backbone of ChatGPT-3, which has approximately 175 billion parameters—naturally discover the implicit rules of grammar and syntax within language by identifying patterns. Deviations in word patterns add creativity to the text generation. Stephen WolframWhat would happen if a massive asteroid struck Earth?While NASA states that no known asteroid currently threatens Earth, past impacts demonstrate that the risk is real. The agency has tested deflection technology to alter an asteroid's path, as this visualization imagines a worst-case collision scenario. What If
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