2008 From Inflation to Deflation

Economy: From Inflation to Deflation
Stock Market: Sell Hope, Buy Despair

Outside the Box: Five Potential Surprises into Year-End

The Face of Deflation
John Riley
For the past couple of years, the Fed and Wall Street have been denying the existence of deflation. Deflation is the worst economic scenario, so it is no surprise that they turn a blind eye publicly even when they are furiously working behind the scenes to prevent it and control it.
One of the ways of denying deflation is to strictly define it only as "a pervasive and constant price decline in all areas of the economy caused by a reduction in credit available or the money supply." While this is one definition, it is not the only definition.
Deflation starts out in the corporate area with a deflation of profits. It then goes to revenues and lastly causes price declines. We have already seen profit deflation and revenue deflation and some industries are experiencing price deflation.


We must start thinking like South American dictators (From The Guardian)
An economy on the brink of deflation needs to jettison the orthodoxies of prudence - in favour of a licence to print money
Deflation and depression are closely related. This week the UK has reported the sharpest drop in producer prices since the series began in 1975, and unemployment has reached an 11-year high with the largest jump in claimants since 1992. The Bank of England is forecasting a severe recession similar to the one that hit the Scandinavian economies after their banking collapses of the early 1990s. This, and the collapse in commodity prices, makes it likely that consumer price inflation will disappear completely before the middle of 2009. If economies weaken only a little further than now feared, then we will experience deflation. Yesterday's consumer price forecast from the Bank of England suggests this is entirely feasible - as Mervyn King, the bank's governor suggests this is entirely feasible - as Mervyn King, the bank's governor, admitted.

More about Deflation: Sense and nonsense about Deflation