Disinflation
Categories: Econ, Financial Theory
Disinflation (often confused with dat-inflation) refers to the decline in inflation rates over time. In 1973, America was fully juiced with war bucks from Vietnam. Inflation hovered around the mid-to-high single digits...like, 7 percent or more, depending on where you looked. And then Jimmy Carter stepped in and raised Fed rates…massively, stamping out the wild bull economy, and putting the brakes on inflation.
But it didn’t happen until after Carter was actually out of office and Reagan took over. Inflation eventually had rocketed all the way to 14ish percent in 1980/81. The crux of disinflation is that inflation is still positive—it’s just becoming…less so.
You know...like how you feel not long after you say “I do”...and the honeymoon is over.
So under Carter, the U.S. inflation rates were attacked in a variety of ways, the biggest of which was to make the cost of renting capital very expensive, which cooled the economy.
But it took a long time. Like, note how slowly inflation rates came down and, well, really, it was decades before things fully stabilized. You can see how things slowly disinflated from the raging levels it peaked at post Vietnam...to 13, 14 percent...then slid allll the way down to 1-3 percent, where it has hovered for a while.
So that’s disinflation—still inflation—but just less of it. Deflation is when inflation turns negative. Like prices are actually declining. And we’ve had periods of deflation, albeit very short ones—like in the post-mortgage crisis malaise in 2009. It’s rare—but it happens.
Class dis, uh…‘missed.
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finance a la shmoop what is disinflation disinflation often confused with dat
inflation refers to the decline in inflation rates over time in 1973
America was fully juiced with Warbucks from Vietnam inflation hovered around [soldiers firing weapons]
the mid going on high single digits and then higher from there like 7% or more
depending on where you look him and Jimmy Carter stepped in on this guy and [Carter walks into office]
raised the federal rates the Fed rates their massively stamping out the wild
bull economy and putting the brakes on inflation but it didn't happen until
after Carter was actually out of office and Reagan took over inflation [Reagan replaces Carter in office]
eventually had rocketed all the way up to about 14 ish percent on an annualized
basis looking at the monthlies in the 1980-81 period right here
well the crux of dis inflation is that inflation is still positive it's just
becoming well less positive and or like you know how you feel not long after you
say I do and the honeymoon is over and you have to take out the garbage so
under Carter the US inflation rates were attacked in a variety of ways the [Carter in a boxing ring]
biggest of which was to make the cost of renting capital very expensive which
cooled the economy but it took a long time like note how slowly inflation
rates came down and well really it was decades before things fully stabilized
you can see how things slowly disinflation the raging levels that
peaked at post-vietnam era 1314 percent then slid all the way down to a 1 to 3
percent way down there where it's hovered for a
while so that's disinflation still inflation but just less of it deflation [Disinflation deflating]
is when inflation turns negative like prices are actually declining and yes
we've had periods of deflation before albeit very short ones like in the post
mortgage crisis Mallove's in 2009 right here yes yes it's rare but it happens
got it okay class dismissed