Wikinvest Wire

It's Deflation Week!

Monday, May 11, 2009

Oh dear! I hope we can make it through the week without the entire global economy slipping over the deflation precipice into the deep, dark abyss from which there is no escape.

The Wall Street Journal reports($) that the scourge of deflation will be sweeping the globe in the days ahead - China today, then on to Europe, and finally it'll wash up on the shores of the good 'ol US of A on Friday when the Labor Department reports April consumer prices.

Falling energy and food prices have pushed down global inflation, and that will continue. Barclays Capital economists expect the U.S., U.K., euro-zone and Japan to rack up negative year-over-year CPI readings through at least September.

That will stoke worries about a global wave of deflation, an unstoppable price decline that causes consumers and investors to park cash on the sidelines, crippling economic growth.

The consequences of deflation are so severe that central banks around the world have aggressively cut interest rates to combat it. Many, including the Federal Reserve, are engaged in "quantitative easing," essentially printing money to pump into the system and keep prices from falling.
Gather the women and children and plan for the worst, hope for the best.

2 comments:

Anonymous said...

Do not taunt happy deflation ball!

Evan said...

an unstoppable price decline that causes consumers and investors to park cash on the sidelines

Does that mean that only inflation makes money? Because I think my cash having double the buying power because prices are half as high is a 100% return on my money.

Oh my God, it only costs 50 cents for a loaf of bread instead of a dollar. I guess nobody will buy bread then. Yeah right.

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