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In recent days I have had a discussion about deflation with a number of my friends and family. I understand that this is not a forum where I am free to discuss anything I want, free to stand on my soap box; this is a blog with a purpose, to help people save on books. But the issue of deflation is important, and will have an impact on the lives of college students, and therefore I feel that I have a responsibility to spend some time on this topic.

Deflation is something that is bound to affect college students, both positively and negatively, and even though such an environment will most likely lead to cheaper books, in the end deflation, though a necessary part of our economic system, is not a good thing.

So what exactly is deflation? Sticking with the overall theme of this blog, books, I will use a bookstore as the main example here. Deflation, simply defined, is the opposite of inflation; inflation is when prices rise (that text book cost $100 last year, and this year it costs $120), subsequently deflation is when prices, in general, fall down (the textbook cost $125 last year and $110 this year). The problem with this is that when we are in a deflationary cycle consumers do not shop because they are concerned that they will overpay for the specific item, and they are constantly waiting for the price of the item to drop. This drop in demand leads to an increase in supply, which leads to companies producing less goods and services because there are fewer people buying products, and which inevitably leads to these companies having to layoff workers. This trend causes an increase in the overall unemployment rate, and since unemployed workers cannot purchase many goods the fear is that this cycle is a self perpetuating race to the bottom. Japan was in a big deflation cycle at during the 90’s and early 2000’s and the Japanese people found that it is very hard to get out of deflation. Deflation is not to be confused with desinflation, which is simply a lower inflation rate (often close to 0%).

Admittedly this is bad enough on its own, but my personal fear is that the governments attempt to preempt this current deflationary cycle, by flooding the market with dollars – just yesterday the congress announced that they will pass an $700 billion dollar stimulus bill – will lead to an increase in the availability of Dollars, and this to inflation. Remember, deflation is bad, but uncontrolled inflation is as bad if not worse.

Here is another interesting story that I found on marketplace.org that discovers the rising cost of textbooks. I found this story particularly interesting because it talks about the reason that textbook prices are rising, and interviews a publishing executive. Very enlightening.

Torrents have become a particularly popular way for college students to download music and movies, and aparently now college students are able to get textbooks for free with torrents as well. Remember that if you don’t own a copy of the book in one way or another, downloading it might be illegal. Check your local legislation.

I was recently browsing archives of marketplace, a show on National Public Radio (NPR) that I try to listen to, and I ran into a few broadcasts that talk about textbooks, college bookstores and the like. This particular one covers the topic of college bookstores, used books, and textbook affordability. Enjoy!