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post 90 1010RD a very healthy economy with persistent deflation.... ...like the US in the 1800s,

post 115 USFRIENDINVICTORIA ...deflation (defined narrowly as steadily lowering prices) isn’t necessarily bad. We have had many historical precedents. The good times toward the end of the 19th century, which 1010RD alluded to... ...overall prices dropped by about half.

OK, if everyone wants we can use this inflation definition (from here):

de·fla·tion (d-flshn)

n.
A persistent decrease in the level of consumer prices or a persistent increase in the purchasing power of money because of a reduction in available currency and credit.

The American Heritage® Dictionary of the English Language, Fourth Edition copyright ©2000 by Houghton Mifflin Company. Updated in 2009. Published by Houghton Mifflin Company. All rights reserved.

--but let's please stop changing it. Next we need to quit tossing out historical records which (like the definitions) sound made up and arbitrary. Here's a website we can use and y'all are welcome to share another if someone thinks they got a better one, but they got to either 'splain why first.

Here are the general price indexes during America's first century and a half in half century jumps:

year	cpi	average annual inflation
1774	7.82
1824	9.35	0.4%
1874	11.04	0.3%
1926	17.7	0.9%

There was no "persistent deflation" with any of those time periods, and "overall prices dropped by about half" is simply not there. Long range prices were flat. Of course, nobody works one day, gets paid 50 years later, and buys food after another 50 years. The historical record of year over year general prices trends was all over the place --ranging from 30% inflation one year to a 19% deflation in another. Crazy. Absolute living hell. Now look at how price stability increased as Congress used the Fed for regulating money's value:

OK so y'all are not happy with how Congress is coining Fed regulated money. I've yet to hear what y'all do want, but let's understand that most people don't want it back the way it was.

Allow me to respond in kind, to your thoughtful response.

1. Your new definition is much better -- it would be perfect, if the part starting with "because" were left off. That part is nothing but an assumption -- and we could fill a hard drive debating it.

2. Please note that your new definition includes: "or a persistent increase in the purchasing power of money."

3. You reposted this statement of mine: "The good times toward the end of the 19th century, which 1010RD alluded to... ...overall prices dropped by about half." You also provided us with a link to a website, from which you extracted some facts about American price indices. Using the calculators on that website, I've extracted the following facts:

year	cpi	average annual inflation
1865	15.79
1899	8.04	-1.97%

IOW, the website you pointed to proves my statement about prices dropping by about half. My historical records were neither made up nor arbitary. Same as my definition -- for which I've already provided plenty of rationale.

4. I don't recall taking a position one way or another regarding the Fed -- nor the efficacy of monetary policy in general.

I would just like to point out two things: (i) as your chart shows, a huge bubble began inflating after the fed was created, and famously burst in 1929 -- leading to the Great Depression. (ii) Keynesiasm started in the mid 1930's as a fiscal policy solution to the depression.

The debate about the relative efficacy of fiscal and monetary policy tools rages on to this day. Your chart could be used to bolster the arguments of either side.

5. FWIW, I do think that monetary policy matters, and that central banks can be a force for stability. They can also be a source of economic disasters.

This article might be of interest to you and our discussion:

http://www.wired.com/business/2013/10/next-big-thing-economic-data/