- Joshua M Brown
- June 11th, 2011
Here a new one for us all to wring our hands over…
The term biflation is relatively new, having been introduced by an analyst named F. Osborne Brown in 2003. Like most new concepts, there is still a lot of debate over its exact definition and parameters. Simply stated, biflation is an economic environment in which inflation of commodity-based assets occurs simultaneously with deflation in debt-based assets. I’ve heard a lot of people describe it as inflation in the things we need and deflation in the things we want, or inflation in services with deflation in durables. Indeed, the following chart shows that this phenomenon has actually been present for well over a decade:
Josh here, we’ve been talking about this already for some time but usually we’ve been calling it stagflation in a nod to the conditions of the 1970′s. With high oil prices and unemployment, we can be forgiven for the comparison. F. Osborne Brown’s biflation is a bit different though…
How is biflation different from stagflation? While biflation refers to an environment in which some prices are increasing and others are decreasing, stagflation refers to a period of more generalized inflation coupled with overall economic weakness. The biflation parameters don’t seem to make any direct calls on economic strength or weakness, but it seems like rising prices in things we need coupled with falling prices in more discretionary items would not be great for economic prosperity.
For the full explanation of what these conditions are all about, head over below.
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The Reformed Broker is a blog about financial markets and the economy. Joshua Brown is a New York City-based investment advisor for high net worth individuals, charitable foundations, retirement plans and corporations... More.