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Economic Concept No One Understands Suddenly Our Greatest Threat

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Deflation has now turned mainstream, with articles appearing in media outlets ranging from CNN to US News & World Report to the New York Times. That's fine, except no one seems to understand what deflation is, what causes it and why it's a necessary consequence of the business cycle, particularly of the specific cycle of institutionalized inflation policies that, as a society, we have chosen to embrace and condone.

Take this example from the US News & World Report, Four Reasons to Fear Deflation. Nearly all of the poor logic and misinformation typically found in mainstream media's coverage of economics can be found in this piece. "[W]hen the price of everything drops, it's an alarming development that portends stagnation," is the customary sign that the reporter or writer is off on the wrong foot. The standard definition of inflation/deflation is a general rise/decline in prices. This is incorrect. It has always been incorrect and forever will be incorrect.

Frank Shostak is an adjunct scholar of the Mises Institute and a frequent contributor to In the video lecture below he explains quite clearly what inflation and deflation really are, how they occur, their consequences and why the mainstream media so frequently get it wrong.
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