November 10, 2008

NEW?:

A New Specter: Deflation (Robert J. Samuelson, November 10, 2008, Washington Post)

Until recently, the idea that deflation -- the decline of most prices -- was possible, let alone a potential economic danger, seemed outlandish. If anything, inflation was the threat. Led by rising oil and food prices, it was increasing in most countries. But in the past two months, deflation has suddenly become conceivable, and, though still a long shot, it's much more menacing than most people realize. The most urgent economic task for Barack Obama and other world leaders is to prevent the long shot from happening.

A mild deflation -- like a mild inflation -- would be barely noticeable, and even pleasurable. Who doesn't like lower prices? But beyond a few percentage points, deflation can create economic havoc by forcing debtors to repay loans in more expensive money and causing consumers to postpone purchases.


Our generally high regard for Mr. Samuelson doesn't prevent our being amused that he believed temporarily high oil prices signaled inflation.

Posted by Orrin Judd at November 10, 2008 8:31 AM
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