Hmmm. Deflation?

Is Econo-Girl crazy?  No one else on Earth, even the depressive Economist magazine, is predicting deflation.  Deflation is lowering prices rather than rising prices.  Inflation is when prices go up.
This is why Econo-Girl goes out on the limb to predict deflation:  because the de-escalation of prices has a snowballing effect.  Shoppers know that if they wait, prices will be cheaper. So they wait.  It is happening in the DC real estate market now.  And Econo-Girl predicts that it will be seen as happening by Christmas.  People will wait for prices to go down.  The poor sales will prompt more prices reductions. 
This prediction is for the short term only.  But it all hinges on consumer belief.  If they believe that prices will continue to go down and consequently wait to spend, then prices will come down to meet them.


The Lazy Iguana said...

Lets hope so. I did not buy one darn thing on black friday. Not even gas.

Wait a minute, I did buy lunch at the airport on that day. Other than that, I did not buy anything.

By the way, CNN money had an article about how the real estate bubble was a myth. I did not read it, as I was not in the mood for some fiction.

Anonymous said...

Uh, Elliott Wave International (www.elliottwave.com) has been forecasting deflation for a long time. Yes, the mainstream media is ignoring deflation, but there are a few analysts who also see it coming.

Econo-Girl said...

I'll go to that web page right now!