The last few months it became clear that life was expensive. The price of oil was very high and everyone was talking about inflation.
But suddenly the oil- and raw material-price began to fall quickly and every country’s biggest fear no longer was inflation but deflation.
Deflation is a general price fall during a longer period and everyone aspects that the prices will fall permanently. It’s very dangerous because spending will be put off and the economy will shrink.
Milton Friedman once said that a central bank has to do everything to avoid deflation, even let helicopters drop money across the country if necessary.
Ben Bernanke, Chairman of the Board of Governors of the United States Federal Reserve, used this metaphor in a speech with his solutions for battling deflation.
This earned him the nickname “Helicopter Ben”.
Hanne Leus
Sources: Trends, Cash, federalreserve.gov
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