Deflation

Now there's a little known term that seems to be gaining traction these days. I noticed the word appearing in a number of recent economic articles. Unlike inflation that is a reference to currency, deflation seems to be a more expansive term used to define a larger economic trend. While inflation means that your money isn't worth much. Deflation means that most of us don't have any and those of us who might can't seem to do much with it. Inflation sucks buying power out of the hands of individuals. Deflation sucks the life out entire economies.

Where does it come from and how does it happen? If I understand it correctly, it is kind of like an old movie I once saw called, "Fate is the Hunter." [Spoiler Alert! I am about to tell you how the movie ends so stop reading this if you have not seen the 1964 classic...] In the film, a plane crashes. The authorities are not sure why so they blame it on pilot error. An investigator begins looking into the accident, partly because he knows the pilot and his reputation and he does not want to see his friend falsely accused and historically responsible for something so horrible unless there is adequate reasons to do so. Toward the end of the story, the investigator puts together a reenactment in which he is careful to recreate everything leading up to crash. It turns out that a spilled cup of coffee was the critical catalyst setting off a chain of events that led to the loss of many lives.

Deflationary trends in economics seem to be something like this. Something goes wrong. And then something else goes wrong. Pretty soon it feels like everything is going wrong. But the real problem is the overriding response to all this. [And understandably so, when the plane starts to go down, it seems like a reasonable time to panic!] But, of course, as more and more people pull back for fear of a spiraling economy, it becomes something of a self-fulfilling prophecy. Things actually begin to get as bad as people are fearing them to be...

Deflation is a dangerous and scary thing and not only for economic systems. Fear can send us scurrying away from everyone and everything--sometimes from the very people and places that might otherwise bring us hope and joy. Don't get me wrong, there is plenty to be concerned about. And for some, there is more than enough reason to pull back from investing and stepping out into a world where things might go wrong. But what happens when we pull back? What happens when more and more people cease to look for the hope and the opportunities? What happens when everyone allows fear or panic to guide their lives?

Remember Mr. Potter? While all of Bedford Falls was slipping into panic, he was just smiling and waiting to pounce. Even George was sweating and very close to giving into his own fear and deflation. But as we are watching, we know what he needs to do. We know that he needs to keep the faith--to keep on keeping on. Right? Because otherwise, Bedford Falls becomes Pottersville.