Everything we have worried about is happening. As much as every Federal Reserve chief and Treasury Secretary has wanted to avoid inflation, deflation was a much greater fear.

Well, here we are! Prices are going down and consumers are soon going to get the idea that all they have to do is wait to get a better price. And that will propel a further contraction in the economy. It's a self-perpetuating cycle.

The exception will be food. There's an anticipated reduction in the volume of food available in stores for the Spring.

1 comment:

The Lazy Iguana said...

Its not only deflation.

It is that many people do not feel secure in their jobs. Who knows if you are going to get canned next! Who knows if the company you work for will go under. And if you do get canned - how long will it take to find another job that pays what you are making now??

People will still buy things - but discretionary spending will be WAY DOWN. People would rather save than spend on things they do not really need.