Economy · Core
Deflation
Deflation is a sustained fall in the general price level — often a demand or debt-deleveraging story, dangerous when nominal debt is high.
Definition
Negative inflation on a broad index, persistent. Relative-price drops (cheaper TVs) are not deflation. Debt deflation (Fisher) raises real debt as prices fall. Cash and government bonds win; levered real assets lose.
Why it matters
ZLB and QE exist because deflation plus debt is a trap. Japan is the textbook; 1930s the nightmare.
Case
Japan’s lost decades: modest deflation, high real rates at a zero nominal policy rate, and a slow grind, not a Hollywood crash.
How to read it
Debt stocks, the policy rate floor, and whether the print is a one-off goods crash or a broad demand failure.
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