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Deflation – The Great Equalizer – Now Greece? Was There a Different TESTED Response in History? YES!

from Armstrong Economics:

Deflation remains a mystery for many because they just cannot grasp the fact that money supply can increase while prices decline. Their heads begin to spin around and they spit out green pea soup because it is not supposed to happen in their mind. During deflationary trends, money supply can still increase but the contraction is so massive that money supply cannot possibly increase at the same pace as assets collapse as demand shrinks into the sunset.

Deflation can emerge from two primary sources – domestic and international. President Grover Cleveland explained his observation during the Panic of 1893 how capital can flee and hoard but labor cannot. Then if taxes rise, capital is consumed by government and that further shrinks the domestic available money supply.

Read More @ ArmstrongEconomics.org

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