September 5, 2009
THE PRESIDENT CAN GIVE US A MASSIVE INCREASE IN DEMAND WITH JUST THE STROKE OF A PEN:
We all want a deal -- that's what's scary: Despite signs of recovery, some see deflation looming (Tom Petruno, September 5, 2009, LA Times)
Deflation fears deepened last winter as the economy worsened and the stock market crumbled. Since March, however, those worries have seemed to abate as the housing market has stabilized, stocks have rebounded and more signs have emerged that the recession was ending.
But in recent weeks I've heard more chatter on Wall Street about deflation, including from some unlikely sources.
This week, Federal Reserve Bank of Dallas President Richard Fisher -- long one of the Fed's loudest voices on the threat of inflation -- had a much different message in a speech at UC Santa Barbara.
"For the immediate future," Fisher said, "the risk to price stability is a deflationary risk, not an inflationary one."
The Fed's benchmark measure of inflation is the so-called personal consumption expenditures price index, which for various reasons the central bank has come to favor over the consumer price index.
In July, Fisher said, nearly 50% of the items in the PCE basket of goods and services were falling in price, even as the gloom over the economy was supposed to be lifting.
Many businesses, he said, "are operating in the shadow of the absence of pricing power."
The demographic implosion and productivity gains driven by technology and liberalization in the Third World mean that global deflation will continue to be a central feature of the world economy. But we are almost uniquely positioned to add to our population thanks to amnesty, increased legal immigration and the religiosity of the culture. Posted by Orrin Judd at September 5, 2009 8:29 AM