Biflation (bi + deflation/inflation) is when both deflation and inflation occur at the same time. For example, there might be deflation in housing, but inflation in commodities.
The term “biflation” is said to have been coined by Dr. F. Osborne Brown, a Senior Financial Analyst for the Phoenix Investment Group, in 2002-03. Some critics have denied that “biflation” exists, arguing that not every segment of any economy experiences deflation or inflation at the same time.
Biflation (sometimes mixflation) 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 typcially 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.
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From: Uncle Yap
Date: Fri, 24 Jun 2005 08:37:33 +0800
Local: Thurs, Jun 23 2005 6:37 pm
Subject: AWSJ : COMMENTARY - China’s Yuan Is Overvalued
From The Asian Wall Street Journal
China’s Yuan Is Overvalued
By WEIJIAN SHAN
June 23, 2005
However, this biflation, or the combination of the inflation of prices of raw materials and the deflation of prices of finished products, squeezes the cash-flow and profitability of Chinese producers. Therefore, China’s growth has historically produced low corporate profits and returns on capital in general. Whereas in any other country, the stock market generally performs in tandem with the economy, Chinese stocks have historically generated exceedingly low or negative returns for investors in spite of sustained economic growth. Companies also see their stocks trade at a substantial premium on domestic stock exchanges to overseas markets, indicating that the return on capital in China is at a discount to that outside the country.
Discussion: Biflation, What is it? Does it Exist?
Posted on 14. Apr, 2009 by Jess in economics, government
So it looks as though the consensus is that biflation is not really an economic state unto itself. It’s more of a term use to describe the particular current conditions going on in the economy right now. Furthermore, it may be erroneous to further pursue a definition of biflation.
Deflation? Try a Tale of Two Inflations
Submitted by asiablues on 06/13/2010 21:03 -0500
By Dian L. Chu, Economic Forecasts & Opinions
Biflation… Not Deflation
Despite the seemingly tame headline inflation numbers, consumers never seem to see price declines in certain categories like education and health. For instance, prescription drug inflation escalated to 5% from less than 3% in 2007 and 2008.
So, it is pretty obvious what we have here--biflation--instead of deflation. Biflation is a state of the economy where inflation and deflation occur simultaneously.
on Mon, 06/14/2010 - 01:23
How is this different from stagflation? Price increases coupled with contraction of the money supply = “stagflation”, no?
(I can’t help noticing that the Wikipedia entry on “biflation” was written by the analyst who coined the term… and not by an economist… er… this smells like someone’s attempt to coin a term).
Is ‘Biflation’ Real?
by Nick Summers
August 16, 2010
It may be “biflation,” a concept now gaining currency on economic blogs. The term is generally defined as inflation and deflation occurring simultaneously in different parts of the economy—specifically, rising prices for commodities that trade in global markets and falling prices for things bought with credit domestically, like homes and automobiles.
Wall Street Journal
FEBRUARY 13, 2011
By AL LEWIS
Ben Bernanke remarked last week on one of the few things that is still made here in America.
“Inflation made here in the U.S. is very, very low,” the Federal Reserve chairman told Congress on Wednesday.
A new form of inflation is increasingly described in the blogosphere. It better explains the pricing paradox Mr. Bernanke has failed to embrace.
It’s called “biflation.”
Everything you already own—a house, a car, a stock portfolio—has rapidly declined in value. Everything you actually need to buy—food, gasoline, medicine, education—is going up.
Biflation is apparently what happens when the Fed creates trillions of new dollars out of nothing, but mostly just gives it to the banks.
New York City • Banking/Finance/Insurance • (0) Comments • Wednesday, February 16, 2011 • Permalink