Can You Have Inflation and Deflation At The Same Time?

[Yavin4]

Is it me, or are we having inflation and deflation occuring at the same time? We are seeing high inflation for common goods: food, energy, etc. However, we are seeing major deflation in assets like housing and stocks.

Is it possible to have both at the same time?

Please educate. I consider DU to be a free university.

[DebJ]

1. certainly possible to have deflation of wages and inflation of goods

prices

[billyoc]

2. Stagflation.

http://en.wikipedia.org/wiki/Stagflation

Fear it.

[HeresyLives]

3. 'Stagflation'

[GoesTo11]

4. Bad economy 101

Stocks are dropping cause profits are dropping. Houses are dropping because - well - they were overpriced. There was a fairly limited stock, so they could shoot up way above their cost to build. Also some of the drop in housing prices is due to mortgage interest rates rising, so actually the cost of ownership hasn't changed a lot.

Anyway, you could certainly see cost of things that have to be produced going up while speculative prices drop. Right now, we're not really in an inflationary cycle where everything goes up to cover the increased cost of everything else. More we have a few big shortages - oil, commodities, food production, due to worldwide demand outstripping supply (or in the case of food, partly supply = farmland being diverted to make alcohol). Then everything else has to sort of catch up with them (transportation costs go into everything. Finally, a big part of what's happening now is the dollar has fallen so much, so anything imported or with a lot of imported content has to go up. If foreign producers try to keep the price in $ the same, they're losing money since their costs are worth less dollars now.

I guess when we put it all together: what we own is worth less, what we need to buy is costing more, so what we own can buy a lot less of what we need. We are getting poorer. Unless you're getting a big raise.

[Extend a Hand]

5. It depends on how you define inflation

if you define inflation and deflation as an expansion and contraction of the money supply respectively then it doesn't make sense. If you define inflation as increasing prices and deflation as a contraction of the money supply, then it makes since. The common usage of the word inflation to refer to either or both increasing prices and increasing money supply sure does make cause confusion.

[MercutioATC]

6. In different sectors? Sure. (and it's not called "stagflation")

Stagflation is "Stag"nant economic growth coupled with in"flation".