Biflation: inflation and deflation, at the same time(Read article summary)
The term 'biflation' describes the simultaneous inflation and deflation of different goods or services. The term may be relatively new, but the concept is more than ten years old.
Shannon Stapleton / Reuters
Here a new one for us all to wring our hands over...
The term biflation is relatively new, having been introduced by an analyst named F. Osborne Brown in 2003. Like most new concepts, there is still a lot of debate over its exact definition and parameters. Simply stated, biflation is an economic environment in which inflation of commodity-based assets occurs simultaneously with deflation in debt-based assets. I’ve heard a lot of people describe it as inflation in the things we need and deflation in the things we want, or inflation in services with deflation in durables. Indeed, the following chart shows that this phenomenon has actually been present for well over a decade.
(See chart here.)
Josh here, we've been talking about this already for some time but usually we've been calling it stagflation in a nod to the conditions of the 1970's. With high oil prices and unemployment, we can be forgiven for the comparison. F. Osborne Brown's biflation is a bit different though...
How is biflation different from stagflation? While biflation refers to an environment in which some prices are increasing and others are decreasing, stagflation refers to a period of more generalized inflation coupled with overall economic weakness. The biflation parameters don’t seem to make any direct calls on economic strength or weakness, but it seems like rising prices in things we need coupled with falling prices in more discretionary items would not be great for economic prosperity.
For the full explanation of what these conditions are all about, head over below.
The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.