Most people have probably heard of inflation but many people have not heard about the reverse of inflation which is deflation. Inflation is where more currency is printed reducing the overall value of a printed currency as a whole. Currencies that are backed by a commodity or pegged to something can only be expanded as much as that commodity is available. A fiat currency is not backed by a commodity and can be expanded at-will. This expansion of the money supply is called inflation.

However, when there is not enough money in the system due to investment, a high savings rate, or people owning too much currency, then deflation can occur if new currency is not introduced. When there is inflation, buying power decreases (your money buys less) but in deflation the opposite occurs, buying power increases but prices tend to increase accordingly and wages tend to fall. Debt has to be paid with a more valuable currency but in the same amount and those who were comfortable or even wealthy can suddenly find themselves in reduced circumstances. In this video, Beau of the Fifth Column talks about deflation spirals and how the US could face mountain deflationary pressures over the next several years.