Hmmm...
Certainly it would have been helpful if deflation had been identified as a more central actor, but IMO it's unjustified to blame a few slow years on deflation, or the Fed, or Greenspan.

Normal business cycles, the Tech bubble, terror attacks, followed by war... Deflation no doubt exacerbated the effects, but, caused everything ? No.

Further, mild deflation is no more corrosive than mild inflation. In many industries and sectors, deflation's been a fact of life for decades, most notably in tech.
However, agriculture, auto manufacturers, the textile industry, and steel producers, among others, have learned to deal with it.
(Sometimes by dying).

Greenspan raised interest rates into the teeth of a deflationary wind and may do so again soon.

If a single proposition unites central bankers these days, it is the belief that price stability—in practice, a low and stable rate of inflation—is the bedrock of sound monetary policy.

Remind me again what Paul Krugman said about monetarism? Something about it being a failed theory that nobody believed in anymore?

OJ:

Seems more like a debate over how fast the US economy can grow, without triggering inflationary pressures.

Obviously, you side with Larry Kudlow.

Michael:

I don't think inflationary pressures are possible anymore because of the globalizing economy. Raise your prices and some sweatshop will undercut you.

OJ:

That's only true of commodities.
Anything with a strong brand, or cachet, or scarcity, can still command a premium.

There are many more factors that go into a retail price, than just the wholesale cost of widget "X".
Transportation costs, reliability of supply, quality, speed of delivery, and ability to customize are all factors which might negate a low foreign bid.

That said, globalization definitely does offer a relief valve for domestic inflation, and dampens the inflationary spiral.

It doesn't end the possibility of inflation.

One of the problems with a global, 'digitized' economy is that when conditions change, they change quickly. The inflation of the mid-60s through 1982 developed over a long period of time, and took strong medicine to remove. If high inflation or strong deflation were to occur now, it would develop much more quickly, and the medicine may not be deliverable in time.

The monetarist view accounts for this (velocity). But instead of the velocity of money, we should really talk about the velocity of information.

What brand name commands loyalty anymore?

Krispy Kreme for one.

Krispy Kreme proves the opposite--a tv driven trend that has folks dumping Dunkin' Donuts but will itself be replaced by the next big thing.

I interviewed the KK guys recently. Turns out it isn't a TV driven trend but a reversion to the marketing methods of the founders, after the company was left to molder be Beatrice till it almost died.

Remind me, please, how the deflationary crisis explains the complaints about the increasing price of pharmaceuticals.

Harry:

Government money.

Government money can't be the whole of it. Except in Chicago, you cannot spend money buying things that don't exist.

Anyhow, it is contradictory to worry about deflation and at the same time promote international free trade arenas whose only economic function is to drive deflation.

Decide which you want, you cannot have both.

Harry --

Falling prices and deflation are not the same thing. The first is good, the second bad.

Deflation IS fallling prices. The problem arises as government acts to maintain high WAGES keeping costs high as profit margins dwindle and production is forced off-line. Let the system clear the excesses and the econonomy will stabilize. Fixed costs, mainly the result of gov't policies that garner votes but are long term economic drags are THE problem. In a defaltionary environment, high and rising taxes as well as employment costs caused by policy, OSHA, EPA etc., etc are costs that cannot be avoided. As the productivity and cost cutting efforts reach their full extent and profits remain elusive, businesses can do nothing but close their doors.