There's good and bad in deflation

caroline baum

As the Cleveland Fed notes, the depression of the 1930s is not the only deflation model

At a time when central bankers warn of deflation, the Federal Reserve Bank of Cleveland is injecting a note of calm, correcting misperceptions that it is the cause of a host of ills. "First, we conclude that deflation often is associated with economic problems that are not, in fact, intrinsic to deflation,'' the bank's economic research staff write in an essay in the bank's 2002 annual report. "Furthermore, it is apparent that small, periodic deflations are not necessarily problematic and that deflation can in fact be compatible with a healthy economy.'' There is good deflation and bad de...