Macro Musings with David Beckworth Bryan Cutsinger on the What the History of Growth Driven Deflation Can Teach us about a Potential AI Boom
Nov 3, 2025
Bryan Cutsinger, a monetary historian and assistant professor at Florida Atlantic University, dives deep into the dynamics of deflation and its historical context. He discusses the nuances between supply-driven and demand-driven deflation, highlighting how the latter can harm markets. Cutsinger draws parallels to the postbellum U.S. era, showcasing how strong economic growth persisted alongside deflation. The conversation also explores the potential of AI to spark productivity, while proposing reforms to help workers navigate these changes.
AI Snips
Chapters
Books
Transcript
Episode notes
Deflation Can Be Growth-Driven
- Supply-driven deflation can accompany economic booms and rising productivity rather than recessions.
- Historical evidence suggests deflation alone need not cause catastrophic financial collapse when driven by supply gains.
Empirical Identification Of Supply Shocks
- Cutsinger and coauthors identify supply vs demand shocks using sign-restricted VARs on gold-standard era data.
- They let supply shocks raise output and lower price level on impact, leaving interest rates and intermediation unrestricted.
Gold-Standard Era: Growth With Mild Deflation
- Across 1880–1900 core gold-standard countries, average real growth ≈2.5% with slight deflation and steady nominal rates around 3.8%.
- The era shows mild, sustained deflation can coexist with rising intermediation and no effective lower-bound crisis.
