We live in an age of information overload where little attention is paid to nuances, definitions and precision. What really counts is not so much what is said but how it’s said, if one wants to capture the situation accurately. As a rule, commentators have made hardly any distinction between deflation and disinflation, confusing investors as to whether the path of the market and its components are moving in the correct direction. Deflation is defined as a process of falling price levels, which is usually associated with a severe contraction in economic activity and/or a fallout in liquidity. Meanwhile, disinflation means a slowing rate of inflation, which is associated with increasing productivity or cyclical slowdowns. The former is devastating, while the latter is normal. It is basically a cyclical or technological process of equilibration where the forces of supply and demand are rebalanced. And that is the situation we are in.
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By Hubert Marleau
By Hubert Marleau
