Productive Deflation

Deflation, the Boogie Man: Most economists embrace inflation as better than the deflation of the 1930s. But, if measured in human time, the 1930s deflation was a period of inflationary cheapening of worktime with the massive unemployment being 100% inflation.

Productive Deflation: As inflation is a two-sided coin (monflation and sinflation), so is deflation. It can come from over-supply of products or under-supply of money. (Witness retailers 2023 response to the collapse of the Silicon Valley Bank: They quickly cut prices (deflation) by 40% or more to have cash flow.) The 1930s deflation resulted from the former Secretary of Commerce and 31st President (Hoover) restricting the money supply. This caused the massive individual inflationary suffering of 25% unemployment.

Lower Prices from Productive Deflation: If measured in the true cost of anything (the substance rather than the symbols of time) Henry Ford's assembly line was an example of productive deflation where the cost of the Model T dropped from $850 in 1908 to $360 in 1916. Increased productivity on the farm reduced the number of farmers from 40% in 1900 to 1% today.