Sunday, August 22, 2010

Understanding deflation

I mentioned back here that I'm not feeling very optimistic about the ecological, economic and political outlook of the next twenty years (whether one may be optimistic about the spiritual, relational and cultural outlook is another matter for another post or three).

In that post, I mentioned not only the ecological and resource crises that I've been banging on about for a while, but also a financial crisis about which I've been on a steep learning curve. If you're like me and have only a fuzzy grasp of economics, then you might find this post by Aaron Wissner on understanding deflation useful. Although he doesn't go into why deflation is so destructive, he did help me get more of a grasp on the causes and logic of it. As he says at the end: "What is deflation? It is being sensible, all at once."
H/T The Automatic Earth.


Matheson said...

I've just read Niall Ferguson's The Ascent of Money. It is basic modern financial institutions 101, from a historical perspective. It traces the origins and basic functions of savings banks, govt bonds, insurance industry, equities, derivatives, and a couple of other basic financial phenomena. He has his own take on certain historical issues, but as a complete novice I found it very useful. I'd definitely recommend it if you haven't read it already.

Dave Barrie said...

I'm appreciating the economic links Byron, however the link to Aaron's post is not taking me where it promises.

Matheson, have you seen the Ascent of Money docos? Having seen them I'm wondering if it is worth reading the book as well?

byron smith said...

Ah, apologies Dave. Now fixed.

Matt - Haven't read it. Thanks for the recommendation. Is it also a critique of contemporary practices or institutions (from a historical perspective) or an apologia? Or simply an account of how we came to be here?

Matheson said...

It's an apologia, to be sure. It explains what certain institutions have contributed and what helpful roles they continue to play - all of which is worth taking into account in any critique. He is also providing historical perspectives on the recent market failures, etc. There is definitely some critique there too - esp of the derivative markets. But there is a broader set of questions which - social, ecological, etc. - which he doesn't attempt to address.

@Dave - haven't seen any of the docos. They no doubt cover the main stuff in the book.

byron smith said...

NYT: The end of the long term housing boom.