Deflation – Theory and Consequences for Private and Company Behaviour

Deflations and depressions are extremely rare. The last severe deflationary depression occurred over 70 years ago. Most economists these days have lost their fear of another deflationary disaster. Events like the dotcom burst, the terrorist attacks of 9/11 and the recent subprime mortgage crisis, however, show that our financial systems and economies are not entirely invulnerable. A terrorist attack in the United States or problems in only one segment of the US economy, are events that made numerous economies around the world tremble. The integration of today’s financial markets and the complexity of its products, make assessments of risk and economic predictions exceedingly difficult. Nobody knows how the next economic challenges in the United States or the European Union will look like and whether they will only affect local markets, challenge a number of economies, or cause a global avalanche that will drag many a country into a severe depression. This book aims to raise attention to the treat of a defla-tionary depression, contribute to a better understanding of its nature and heighten the awareness of present day economic threats and possible countermeasures.