Credit crisis has been the buzzword, if not lately, then about few months back. Now the buzzword is stimulus package and recession. Well that actually has been the after effects of credit crisis itself. There have been many who have tried to explain credit crisis, using hi level mathematics and english, that is beyond my comprehension. Well today i found a link to answer of the same question, WHAT THE HELL IS CREDIT CRISIS? And the amazing part is its a video, so much better to understand.
I liked it and its actually a layman’s guide to Credit Crisis. Its by Jonathan Jarvis.
There is a lot of talk of disinflation and deflation these days. But what do we mean by it all. Imagine a car moving at 100 mph . Suddenly it slows down to 20 mph almost in a very short period. That is disinflation. Imagine now that this car slows even further, going into reverse in another short interval. That is deflation.
Only the car is economy and speed is the inflation rates.
Does that mean that if inflation, which after all is a measure of expensiveness, goes down it will be good for consumers. Appears so on the surface, but in the current scenario it is not so. It rather shows that there is no demand or desire among consumers to buy. Less people buy, less economic activity, less growth. Hence a moderate inflation rate is considered to be good for economy.