Deflation is a decrease in the general price level of goods and services. It's the opposite of inflation which occurs when the cost of goods and services is rising. Deflation can be caused by several economic factors including a decrease in the demand for products, an increase in the supply of products, excess production capacity, an increase in the demand for money, or a decrease in the supply🍎 of money or availability of credit.

Deflation can be a cause for concern among economists because a fall in the prices of goods and services can sometimes lead to a fall in home prices, stock prices, and even people's salaries.

There have been several deflationary periods in U.S. history including from 1815 and 1860 and again between 1865 to 1900. One of the most dramatic deflationary periods in U.S. history took place between 1930 and 1933 during the 澳洲幸运5官方开奖结果体彩网:Great Depression. Deflation rarely occurred in the second half of the 20th century. The drama⭕tic and consistent price increases from 1950 to 2000 have been unparalleled since the founding of the country.

Deflation in the 19th Century

The U.S. didn't have a single national currency until after the Civil War but economiဣsts can still track consumer prices in terms of the exchange value of gold.

Prices rose and the U.S. government printed money🐲 and borrowed heavily during the War of 1812, a conflict fought between the United States and the United Kingdom🍸 from June 1812 to February 1815. Buoyed by the rise of industrial mechanization after the war, the prices of goods dropped beginning in 1815 and continued to drop until 1860.

Output grew consistently during this time even though prices were dropping and it continued to grow until approximately 1860 at the start of the Civil War.

Prices dropped by nearly 3% every year from 1873 through 1879 but real national product growth was around 7% during the same period. Historians have called this period "The Long Depression" because of the presence of deflation despite this 澳洲幸运5官方开奖结果体彩网:economic growth and the rise of real wages.

The Great Depression

Deflationary periods were the result of an increase in pro♚duction rather than a decrease ꦇin demand in the 19th century. Deflation was the result of a collapsing financial sector and bank failures during the Great Depression.

The deflation that took place at the outset of the Great Depression was the most dramatic that the U.S. has ever experienced. Prices dropped an average of nearly 7% every year between 1930 and 1933. There was also a dramatic drop in output during the Great Depression in ♒additio𓄧n to a drop in prices.

Deflation in the 21st Century

The most recent deflationary period in U.S. history was during the Great Recession which officially lasted from December 2007 to June 2009. There was a drop in commodity prices during this time, particularly oil, and economists worried that deflation would lea💝d to ꦺa prolonged recession and rising unemployment, creating further strain on the U.S. economy.

The deflation that occurred was less severe than some economists predicted, however. The exact reason for this is unclear but some have speculated that the unusually high cost of borrowing in late 2008 and 2009 put pressure on businesses and prevented them from cutting their prices.

The Bottom Line

Deflation is a phenomenon in which the general price level of goods and services decreases over time. It's the opposite of inflation when costs rise. Deflation can be caused by a decrease in demand for certain goods, an increase in supply, and a decrease in the availability of funds or credit. There have been a few periods of deflation in U.S. history, most notably the Great Depression and the Great Recession.

Correction—July 18, 2024: This article has been corrected to state that the Great Recession occurred from 2007 through 2009.