Deflation, much worse than downturn, is becoming a genuine risk to your business. Governments cannot come to the help of businesses. You are accountable for the success of your firm in tough times. You will need to turn to providing ever better goods and services at the lowest possible cost, in order to gain the ongoing support of your customers through customer engagement, today starting.
Deflation -considerably more dangerous than inflation – is now an extremely real danger to your business. Central Banks traditionally believes that printing money cures deflation by increasing inflation – an over-application of Keynesian economics. But will background support this view? The Japanese experience suggests that the “printing money” approach can not work – neither do zero interest rates cure the problem. The cost of deflation to japan economy was ten years of stunted activity and more than 16 percent of the value of GDP.
There is hope that different actions can be used to good impact for, when Sweden faced the same problem their quick and effective action reduced the cost to three percent of GDP and shortened the space to three years. Even that three percent is expensive; and that means you have to handle the question about how exactly you and your company can tackle the perils of deflation when everyone else has cut prices and hemorrhages money? Business needs to grow – most of the right time.
When that need disappeared twice in the past century we confronted both deepest, longest slumps …