November 20, 2008

DEFLATION IS GLOBAL, SYSTEMIC, AND DURABLE--"INFLATION" WAS A PRODUCT OF A DYSFUNCTIONAL OIL MARKET:

Deflation: What Investors Need to Know: A rapid drop in inflation may help shoppers' dollars go further, but it's a disturbing trend for investors (Ben Steverman, 11/20/08, Business Week)

[I]nstead of inflation, the problem is deflation, a downward drift in prices that could squeeze corporate profits and investor returns to uncomfortable levels.

On Nov. 18, a government report showed an unexpectedly large 1% drop in the October consumer price index, including an 8.6% plunge in energy prices last month. Excluding energy and food, the CPI fell 0.1%, the first drop in the so-called "core" index since 1982.

On Nov. 17, the producer price index, a measure of wholesale prices, fell 2.8% in October, including a 12.8% fall in energy prices. That was the largest decline in the PPI in the report's 61-year history.

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Posted by Orrin Judd at November 20, 2008 8:56 AM
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