Inflation or Deflation?Are we heading for inflation or deflation and how can we prepare ourselves? Deflation is when prices go down because economic activity grinds to a halt. People stop buying and hiring and just save their money. Inflation is when there is too much money chasing too few goods and the prices go up.
These two states are supposed to be mutually exclusive, but they are not. We are going into simultaneous inflation and deflation. Because of the debt deleveraging people are slowing down their spending. At the same time the Fed which is afraid of deflation is printing money which is inflationary.
