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We at Cornerstone do not view deflation from a monetary standpoint
Deflation – not a monetary phenomenon
Unlike most economists, we at Cornerstone do not view deflation from a monetary standpoint.
This, we believe, is the mistake both Wall Street and the Fed are making.
Instead, we look at it from a businessman’s perspective.
John Riley, 03/12 2007
A businessman’s perspective on deflation is where he creates a product with the expectation of selling it for a certain price.
But along comes a wave of foreign goods selling for much less. He is now forced to lower his prices to compete.
It has nothing to do with the money supply.
It has nothing to do with interest rates.
It has nothing to do with the velocity of money.
Foreign competition, even if it is only 5% of the market, can dictate the price of the product. Consumers flock to the lowest prices. Or should I say best value. Ask Detroit.