Deflation is a good thing...

The Incredible Disappearance of Deflation in America

By Robert Wenzel

Price deflation is not a bad thing. It means that consumers are able to buy things more cheaply. (SEE:Murray Rothbard and the Deflation Bogey)

Under current generally expansionary Fed monetary policy, there hasn't been a general deflation in decades (Although, amazingly, Paul Krugman frets about deflation regularly over at NYT). Only a limited amount of goods, where high productivity gains occur, such as personal computers and flat screens televisions, fall in price these days, rather than a general deflation.

The chart below, which appeared at the blog of the New York Federal Reserve Bank, shows the historical record of inflation and deflation in the United States (green lines show periods of deflation). Since the Great Depression, the Federal Reserve, through its money printing policies has for all practical purposes eliminated deflation from the economic environment. That is, consumers no longer get to experience periods of generally cheaper goods. Now, it's all about differing levels of inflation,

The New York Fed notes:

After the typical bout of inflation that accompanies war—and the graph illustrates that inflation was, incidentally, much milder in the case of World War II than in the previous cases of World War I and the Civil War—a lax attitude about inflation (and for some, an ill-advised advocacy of the belief that inflation would reduce unemployment) led to the most cumulatively inflationary episode (the mid-1960s through the 1970s) in the nation’s history and pre-history. Federal Reserve Chairman Paul Volcker’s defeat of inflation in the early 1980s ushered in the longest period of low and stable inflation rates in American history.

That stability will likely soon be a thing of the past. The Federal Reserve has printed an enormous amount of money since the 2008 financial crisis. It has not yet resulted in a general overall acceleration in price inflation because of increases in productivity and, most important, a strong desire by individuals (and corporations) to hold significant cash balances in the wake of the 2008 crisis.

As a new Fed manipulated boom develops and unemployment continues to fall, the desire to hold large cash balances will shrink and price inflation is going to make-up for lost time. The spike in inflation to pre-Volcker levels will not be out of the question...

Read more here:
http://www.economicpolicyjournal.com/2014/12/the-incredible-disappearance-of.html