Deflation is largely considered to be a destructive force. Our economy, and Wall Street in particular, is based upon the concept that growth is the only option. Since the end of the Great Depression, each of the major indices in the United States has increased dramatically. The average rate of growth has been about 3 percent, give or take. People investing money for retirement, either by putting money into a company 401(k) or in some other manner, rely upon this fact every single day. The market might not move upward every month or even every year, but given a big enough picture, prices keep moving up. In this sense, deflation would be catastrophic.
However, a manner of deflation that is currently ongoing is actually a pretty good thing. (more…)