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 in recent history. In recent years Governments, Central Banks and committees of economists have concentrated almost solely on manipulating interest rates to be able to balance the perceived priority of managing inflation. THE LENDER of England has to all intents and purposes done little apart from try to minimize inflation before “market meltdown”, and the threat of a collapse of the banking sector became the concern. Currently a new economic situation has been fought using the same old tools. It might become apparent that those old tools being applied to the current uncommon circumstances, have the tool of a silicone variable spanner.

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Governments and Central Banks gamble that falling demand will lead to dropping prices and also have cut rates of interest to kick start economic activity through a go back to inter-bank lending. Therefore the output is far, to say minimal, discouraging – and the outlook is not good either. Many banking institutions continue to distrust one another as they believe that others have been as underhand or foolish as they have and might not be able to repay loans any more than they can. Many have taken government money to include liquidity with their balance sheets and reduce the hidden obligations that ultimately they will need to confess.

Some have even taken the chance to continue steadily to pay massive and undeserved bonuses to those that have damaged stockholder value. Truly the lunatics, remarkably “street-wise” lunatics, continue to manage the asylum. Will there be a solution? So far every attempt at a remedy to the relatively simple problem has been met with little success. The risk is that now the problem will become a lot more complex and the probability of finding a remedy will be greater. We’ve seen two long and deep depressions since the 1930’s. The cause is known – the global solution might not be sadly. Through the Great Depression of the 1920’s and 1930’s some 26% of workers were without work.

In theory this might have intended that much better than 70% were doing fine. Prices were falling so that in place enhanced buying power seems to be the same as a normal and substantial rise in disposable income. So why did it not work like that? As prices dropped and deflation gripped the markets, the loss of business was much larger than the 4-6 percent that might be likely to be typical.

Goods were stockpiled, plants were shut. More employees were on the small amount of time or without work. Demand continuing to fall and with it investment. Those few that acquired cash were convinced that cash was to be preferred to dropping stocks resulting in works on the banks. By this right time there was a market meltdown that had not been manufactured by the banks, but that resulted from the simple fact that nobody was considering investment, growth, or innovation. Eventually a combination of the “New Deal”, the post-war re-application of Keynesian economics after Bretton Woods, and the destruction of infrastructure during World War II dragged the world free from the pernicious ramifications of deflation.