What is deflation?

Deflation is the general reduction in prices and wages. This sounds quite a good idea until one considers how this might happen. Why would a worker accept a reduction in wages? Only if they lost their job and had to reapply.
Deflation occurs at times of deep recession and is hard to stop once it has started. The best asset to hold in deflationary times is cash because it will always buy more tomorrow than it does today.


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