NEW YORK CITY—In his most recent blog post, Ethan Penner examines the relationship between inflation and economic strength. Drawing on statistics from the IMF, he attacks the conventional wisdom that inflation is a positive, and shows how slower growth correlates to higher regions of inflation.
“There is a belief among Keynesian economists that deflation, or an environment in which prices drop, might cause people to delay their purchases, believing that if they wait prices will be lower, and that these delays will lead to a veritable death spiral of lower sales, lower prices, and lower employment. I believe that lower prices actually stimulate spending. For me, cheaper prices motivate me to consider buying, and I’d bet this is true for most people.“