1, 1837- 1843: Due to the free flow of capital, the reserves of the Bank of England are decreasing. In order to resist the dilemma of capital outflow, Britain announced a rate hike (similar to now), which indirectly caused the global financing cost to rise. There has been deflation in the United States, reaching a peak of -6% according to statistics of Thorp (1926).

Impact: With the collapse of cotton prices, the southern American economy suffered heavy losses. However, there have also been internal struggles in American politics. President andrew jackson rejected the reauthorization of the Second Bank of the United States (the Central Bank), and the role of the Central Bank as a lender of last resort was lost. Local banks began to be reluctant to lend and went their own way. This phenomenon has gradually evolved into liquidity crisis and redemption crisis, the collapse of some banks and corporate debt default.

2. 1873- 1896 (long-term deflation): The NYSE was forced to close for 10 day because the benchmark company Jay Cooke Company failed to borrow money and the market panicked. Subsequently, the United States experienced the longest deflation in history (still so far), reaching 65 months.

Impact: As a result, the domestic money supply in the United States has been greatly reduced, financing costs have started to rise, and investors have begun to pursue liquidity and reduce their investment in long-term bonds and stocks. During the period of 1870, nominal wages in the United States fell by a quarter, even in Pennsylvania, by half.

3.1920-1921-After World War I, the world economy was depressed, and the United States experienced one of the most severe deflation in history, reaching-18% (according to the data of the US Department of Commerce).

Impact: The price reduction of some wholesale commodities reached nearly 40%, which was unmatched even in the later Great Depression. The reason is also relatively direct-the disintegration of the wartime economy left a lot of production capacity idle; The return of combatants who participated in World War I indirectly contributed to the rise of unemployment rate.

4.1929-1937-1929 The American economic crisis was caused by the Wall Street crash. In the 18 months before the fatal day, the bull market of Wall Street stock market seemed unshakable, with 50 million shares traded every day for a while.

Impact: It has dealt a heavy blow to the capitalist world, with the economy declining by more than 40% and foreign trade shrinking by more than 60%. The economies of major capitalist countries have generally regressed for more than 30 years.

This made the fragile post-war world system Versailles-Washington system even more fragile, and the German and Japanese imperialist countries suffered heavy losses. The bourgeois government embarked on the road of fascism, gradually formed the cradle of the Eurasian War, and began to expand its army to prepare for the invasion and expansion of Zhang Zhilu.

At the same time, the fascist movement in the United States, France and other European capitalist countries is rampant, and people of all countries and democratic and progressive forces are opposed to fascism. This great crisis has accelerated the arrival of a new world war.

Extended data:

Causes of deflation

Although different countries have different specific reasons for deflation in different periods, from the theoretical analysis of deflation by economists at home and abroad, the general reasons for deflation can still be summarized as follows:

1. Tight monetary and fiscal policies

If a country adopts tight monetary and fiscal policies and reduces the money supply,

Cutting public expenditure and reducing transfer payments will lead to the imbalance between commodity market and money market, resulting in "too many commodities pursuing too little money", which will lead to policy tightening deflation.

2. Changes in the economic cycle

When the economy reaches the peak stage of prosperity, due to a large surplus of production capacity and oversupply of commodities, prices will continue to fall, leading to periodic deflation.

3. Institutions and institutional factors

Institutional changes (enterprise system, security system, etc.). ) will generally upset people's stability expectations. If people expect that income will decrease and expenditure will increase in the future, then people will "spend less and save more", resulting in insufficient effective demand and falling prices, which will lead to deflation of institutional variables.

4. Adopting new technologies and improving labor productivity

Due to technological progress and the wide application of new technologies in production, labor productivity will be greatly improved, production costs will be reduced, and commodity prices will fall, resulting in cost-cutting deflation.

5. The efficiency of the financial system is reduced.

If the bank credit expands blindly when the economy is overheated, resulting in a large number of bad debts and non-performing assets, financial institutions will naturally "be reluctant to lend" and "be cautious about lending", which will inevitably lead to credit contraction caused by bad expectations of enterprises and residents, which will also reduce the total social demand and lead to deflation.

6. The effective demand for investment and consumption is insufficient.

When people expect the real interest rate to fall further and the economic situation continues to be poor, the demand for investment and consumption will decrease, and the decrease in total demand will lead to the decline in prices, thus generating demand-driven deflation.

7. Defects in the exchange rate system

If a country implements the linked exchange rate system linked to a strong currency, its currency will be overvalued, which will lead to a decline in exports, a surplus of domestic commodities, difficulties in business operation, a decrease in social demand and a continuous decline in prices, thus forming the external impact of deflation.

There is serious deflation in our country, and its causes are complicated, which are not only the profound background of the global economic situation, but also the multiple influences of internal factors in our country, both objective and subjective. There are different views on the main causes of deflation in China.

References:

Baidu encyclopedia-deflation