The Great Deflation

The Great Deflation or the Great Sag refers to the period from 1870 until 1890 in which the world prices of goods, materials and labor decreased, although at a low rate of less than 2% annually. This was one of the few sustained periods of deflationary growth in the history of the United States.

Many businesses suffered, such as warehousing, especially in the London area, due to improvements in transportation, like efficient steam shipping and the opening of the Suez Canal, and also because of the international telegraph network. Displaced workers found new employment in the expanding economy as real incomes grew.

By contrast to the mild deflation of the so-called Great Deflation, the deflation of the 1930s Great Depression was so severe that deflation today is associated with depressions, although economic data are not quite as clear on the matter.