This week's news of a drop in consumer prices may sound on the surface like a good deal for financially strapped U.S. households. But economists warn that sustained deflation -- a period of falling overall prices -- would deepen the nation's economic troubles. Such a period would make it harder for people to repay debts and would prompt consumers to delay purchases in anticipation of lower prices and harder times. Full Story »
Posted by Derek Hawkins
Economics is a science on par with theology, in that predictionsmost often will not come to light during one person's lifetime. As Keynes stated, to the effect thatthese theories only apply in the short run, in the long run, they don't matter because we're all dead. A correction to cover the hidden inflation of the last bubble period while it may be painful, is entirely necessary. Greed and speculation 's price will be paid by all, not the beneficiaries.
The issue is less price cutting, it seems to me, than no sales," said Edwin M. Truman, a longtime Fed and Treasury official who is now a senior fellow at the Peterson Institute for International Economics. He said that people were holding back on buying goods today “not in order to spend tomorrow, but because they’re worried about having a job tomorrow.”
