RE: RO in RENO
"If anytime recently you bought some screws only to have your power driver rip their little heads off you know what I'm talking about, in short you can no longer get a good screw in this country. And regardless of the purchase price it was a waste of money."
I had to really laugh at this comment "in short you can no longer get a good screw in this country." Because in all actuality...that is exactly what we are getting in this country!!!
JUDGMENT CALLS
Recovery Killer?
How lower prices could actually hurt the economy.
Nov 10, 2008 | Updated: 12:51 p.m. ET Nov 10, 2008
- Share:
-
Email To A Friend
Please fill in the following information and we'll email this link.
Until recently, the idea that deflation -- the decline of most prices -- was possible, let alone a potential economic danger, seemed outlandish. If anything, inflation was the threat. Led by rising oil and food prices, it was increasing in most countries. But in the past two months, deflation has suddenly become conceivable, and, though still a long shot, it's much more menacing than most people realize. The most urgent economic task for Barack Obama and other world leaders is to prevent the long shot from happening.
A mild deflation—like a mild inflation—would be barely noticeable, and even pleasurable. Who doesn't like lower prices? But beyond a few percentage points, deflation can create economic havoc by forcing debtors to repay loans in more expensive money and causing consumers to postpone purchases. In the Great Depression, deflation reigned. Consumer prices fell about a quarter from 1929 to 1933. Spending collapsed. Supply swamped demand, driving prices down. By 1933, manufacturing output had dropped 39 percent and joblessness had reached 25 percent.
It's this history that makes deflation terrifying. Obama and his fellow leaders should worry. Since mid-September, economic conditions have deteriorated badly. In October, General Motors' U.S. sales were down 45 percent from a year earlier; Toyota's fell 26 percent. Payroll employment dropped by 240,000, the 10th straight month of decline. Abroad, signs of distress also abounded. In September, manufacturing orders in Germany fell 8 percent from August. Stock markets in developing countries have declined about a third since September.
By all odds, this signals a recession that, though severe, fits within the post-World War II experience. It will suppress inflation, not trigger deflation. Remember: U.S. consumer prices in September were about 5 percent higher than a year earlier; in developing countries, inflation now averages about 9 percent. Remember, too, the economy has changed fundamentally since the 1930s. Then, factories and farms dominated. Gluts quickly depressed prices of wheat, steel and meat. Now, our service economy features health care, entertainment and education. Their prices are less volatile.
Still, this crisis has repeatedly confounded "experts." A few months ago, it was widely believed that many poor countries had largely escaped the financial turmoil of rich countries. Their growth would cushion the downturns in the advanced world. No more. In 2007, China grew 11.9 percent and India 9.3 percent. The latest forecast from the International Monetary Fund cuts their growth in 2009 to 8.5 percent and 6.3 percent. Indeed, the IMF has tossed out forecasts made only a month ago. It now predicts harsher recessions for rich countries and slower growth for poor countries.
So, there's an outside possibility that we're on the doorstep of a more dangerous global downturn. Something significant happened in mid-September, either caused by the bankruptcy of Lehman Brothers or coincident with it. Trust among financial institutions evaporated. Credit spreads—the gap between commercial interest rates and rates on safe Treasury securities—exploded. Stock markets plunged. Economies everywhere lurched downward.
- 1
- 2
- Next Page »
- Share:
-
-
-
-
-
-
-
