Deflation

Deflation is the word used to describe falling prices. These are not necessarily a bad thing. They can, for example, be caused by rising productivity or reduced costs in an industry. But a period of sustained nationwide deflation can be very destabilising.

If consumers feel that prices are likely to fall over time, they tend to delay purchases (they hold cash with the expectation of being able to purchase the same goods at a lower price later). This pushes down corporate profits which, in turn leads to cost cutting and unemployment, which then reduces consumption further.

Deflation is also bad for borrowers contractually committed to making cash repayments. As prices fall, the real value of debt rises, making it much harder to pay back (prices and your wages may be falling, but the debt stays the same).

66% off newsstand price

12 issues (and much more) for just £12

That’s right. We’ll give you 12 issues of MoneyWeek magazine, complete access to our exclusive web articles, our latest wealth building reports and videos as well as our subscriber-only email… for just £12.

That’s just £1 per week for Britain’s best-selling financial magazine.

Click here to take advantage of our offer

Britain is leaving the European Union. Donald Trump is reducing America’s role in global markets. Both will have profound consequences for you as an investor.

MoneyWeek analyses the critical issues facing British investors on a weekly basis. And, unlike other publications, we provide you with the solutions to help you turn a situation to your financial advantage.

Take up our offer today, and we’ll send you three of our most important investment reports:

All three of these reports are yours when you take up our 12 issues for £12 offer today.

MoneyWeek has been advising private British investors on what to do with their money since 2000. Our calls over that period have enabled our readers to both make and save a great deal of money – hence our position as the UK’s most-trusted investment publication.

Click here to subscribe for just £12