There is a real concern that US will enter into deflationary spiral. If you don't know what I'm talking about, wikipedia describes it as (linked deflation article has more information)
Now what I have peen pondering is that how this affects cross pair values? Does it make dollar more expensive? Have there been any occurences of such spiral in times where the deflationary currency is floating as almost all currencies are now? Is JPY after 1990 a good example?
edit: is deflation really even possible because all the newly printed dollars? If deflation would come, would that cause non-US instances to buy everything in the US because they have the dollar debt ie.very large quantities of dollars?
Any comments are welcome.
QuoteDislikedIn economics, a deflationary spiral is a situation where decreases in price lead to lower production, which in turn leads to lower wages and demand, which leads to further decreases in price. Since reductions in general price level are called deflation, a deflationary spiral is when reductions in price lead to a vicious circle, where a problem exacerbates its own cause. The Great Depression was regarded as a deflationary spiral.
edit: is deflation really even possible because all the newly printed dollars? If deflation would come, would that cause non-US instances to buy everything in the US because they have the dollar debt ie.very large quantities of dollars?
Any comments are welcome.