Deflation 2007

By: EconomyWatch   Date: 14 October 2010

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Deflation 2007 is one of the most important economic phenomena in recent times. Deflation 2007 has just started to affect global economy, and a careful study of its increasing or decreasing trend helps in better understanding of the ways in which it impacts the world economic conditions.

Prior to 2007, the world economy displayed inflationary trends where there was more monetary inflation and less price inflation. However, the trend has changed with effect from 2007, when monetary deflation replaced both price and monetary inflations, at a rate which is twice that of the price inflation rate prevailing in 2006.

Deflation 2007: the current status
Economists and experts argue that 2007 is a year when both inflation and deflation is expected and found to affect the world economy. In fact, the first quarter showed inflationary trends, which is replaced by the rise of deflation in the present quarter. In the initial period of 2007, inflation was spreading across the globe like a wild fire. This led to the growth of money in almost all principal global economies to about 10% or more, on an annual basis. It was at this quarter, that China experienced the highest growth rate of 18% and more.

In the next quarter, the global economy displayed an intense deflationary trend, with Chinese, Japanese and European Union economies showing deflation in some of the worse conditions. In an attempt to stay away form the effects of Deflation, the economies of China and Japan have virtually stuck to zero or undervalued rates. In a way, both the nations seem to be under the control of cheap monetary system.

With low interest rates, it becomes very difficult for the central banks to decrease the interest rates further to remain ahead of the coming financial bankruptcy. However, it will perhaps not be possible for them to stay out of the demand fall. As of now, this situation is found to culminate into an immense worldwide economic depression called Deflation. However, no one can surely predict as to what is waiting ahead for global economy in future. Only time can forecast the future of the world economy.


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