0% FINANCING TOO HIGH

Consumer Price Stall Ups Deflation Fears (ERIC BURROUGHS, 5/16/03, Reuters)

Consumer prices excluding energy and food eked ahead at the slowest year-over-year pace in 37 years in April, while the once robust housing market cooled during the month, according to government data that fanned fears of the danger of deflation.

The core Consumer Price Index (news - web sites) rose at just a 1.5 percent pace for the 12 months ended in April, its slowest clip since March 1966, the Labor Department (news - web sites) said on Friday. The core Consumer Price Index (CPI) was flat for a second straight month -- the first time since 1982 the core index hasn't risen in any two consecutive months.

The overall CPI fell 0.3 percent in April, but like the big drop in wholesale prices reported a day earlier it was driven down by a big drop in oil prices since the start of the Iraq (news - web sites) war eased worries of supply disruptions.

The figures raised the prospect of a further slowing in core consumer prices that has investors fearing that deflation, or an extensive decline in prices across the economy, could ensnare the U.S. like it has Japan.

While I doubt we're headed the way of Japan real soon, deflation is clearly a greater threat to our economy than inflation is right now. Particularly worrisome is the implication true deflation would have on the debt burden of Americans.