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DEFLATION? -- WHAT DEFLATION?

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5/16/2003 6:31 PM

DEFLATION? -- WHAT DEFLATION?

Pick up any buisness magazine these days and all you read about is fuzzi-headed thinking that deflation is upon us. Deflation? What Deflation?

- Housing prices are at an all time high and rose an average of 7% over the past year.

- Super market food prices continue to soar.

- Gasoline is near an all time high with some Western states reporting prices in excess of $2.00 per gallon.

- I can no longer buy a decent car for less than $20K.

- Good American made guitars such as Fenders, Gibsons, and Taylors cost as much as ever.

If anything we need LOWER prices. You mean to tell me that GW actually thinks he's doing me a favor by deliberately persuing policies to raise the prices of everything I buy?

The fact is that we are in period of inflation and nobody cares. Not Bush, not Greenspan, not the Democrats, not the republicans. This deflation talk is just another excuse by government to crank up the printing presses and start printing and spending money willy-nilly.

Inflation here we come.

5/16/2003 7:28 PM

Unfortunately, I think we won't see any of the benefits of deflation; it generally plays itself out in the arena of a devalued dollar vis'a'vis foreign trade. In other words, people in OTHER countries can buy our goods cheaper, but not us. This may be a net gain for larger manufacturers, as it will stimulate more sales overseas. The benefits to us will be stronger employment figures. It should all work itself out soon enough. My main hope is for a stronger job market, frankly.

5/16/2003 7:39 PM

Skreddy,
Correct you are on that account. Free markets should and most often do search for equilibrium. That is the economic theory that the Phd in 'A Beautiful Mind' developed.

What the economists are talking / writing about is the drop in the wholesale price index. Those decreases will reach the consumer price index as less expensive products hit the retail markets. Those with 'just in time' inventories hurt the least in that sort of transition and those with heavy and expensive inventories do the worst. Of course the opposite is true during inflation. It does work out.

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