Biflation
Encyclopedia
Biflation is a state of the economy
where the processes of inflation
and deflation occur simultaneously. The term was first introduced by Dr. F. Osborne Brown, a Senior Financial Analyst for the Phoenix Investment Group. During Biflation, there's a rise in the price of commodity
/earnings-based assets (inflation) and a simultaneous fall in the price of debt-based assets (deflation).
The price of all assets are based on the demand for them versus the volume of money in circulation to buy them.
With biflation on the one hand, the economy is fueled by an over-abundance of money
injected into the economy by central banks. Since most essential commodity-based assets (food, energy, clothing) remain in high demand, the price for them rises due to the increased volume of money chasing them. The increasing costs to purchase these essential assets is the price-inflationary arm of Biflation.
With biflation on the other hand, the economy is tempered by increasing unemployment
and decreasing purchasing power
. As a result, a greater amount of money is directed toward buying essential items and directed away from buying non-essential items. Debt-based assets (mega-houses, high-end automobiles and other typically debt based assets) become less essential and increasingly fall into lower demand. As a result, the prices for them fall due to the decreased volume of money chasing them. The decreasing costs to purchase these non-essential assets is the price-deflationary arm of biflation.
Economy
An economy consists of the economic system of a country or other area; the labor, capital and land resources; and the manufacturing, trade, distribution, and consumption of goods and services of that area...
where the processes of inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
and deflation occur simultaneously. The term was first introduced by Dr. F. Osborne Brown, a Senior Financial Analyst for the Phoenix Investment Group. During Biflation, there's a rise in the price of commodity
Commodity
In economics, a commodity is the generic term for any marketable item produced to satisfy wants or needs. Economic commodities comprise goods and services....
/earnings-based assets (inflation) and a simultaneous fall in the price of debt-based assets (deflation).
The price of all assets are based on the demand for them versus the volume of money in circulation to buy them.
With biflation on the one hand, the economy is fueled by an over-abundance of money
Money
Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past,...
injected into the economy by central banks. Since most essential commodity-based assets (food, energy, clothing) remain in high demand, the price for them rises due to the increased volume of money chasing them. The increasing costs to purchase these essential assets is the price-inflationary arm of Biflation.
With biflation on the other hand, the economy is tempered by increasing unemployment
Unemployment
Unemployment , as defined by the International Labour Organization, occurs when people are without jobs and they have actively sought work within the past four weeks...
and decreasing purchasing power
Purchasing power
Purchasing power is the number of goods/services that can be purchased with a unit of currency. For example, if you had taken one dollar to a store in the 1950s, you would have been able to buy a greater number of items than you would today, indicating that you would have had a greater purchasing...
. As a result, a greater amount of money is directed toward buying essential items and directed away from buying non-essential items. Debt-based assets (mega-houses, high-end automobiles and other typically debt based assets) become less essential and increasingly fall into lower demand. As a result, the prices for them fall due to the decreased volume of money chasing them. The decreasing costs to purchase these non-essential assets is the price-deflationary arm of biflation.