The Symptom of Deflation

By Econ70 | 04/01/2011

Deflation 101: It’s critical to keep in mind that deflation is a symptom of weak demand but it is not necessarily a cause. If we attack the symptom of falling prices with a dose of inflation, we risk having 2 problems not 1–inadequate real demand and unwanted inflation. Yes, deflation has hurt Japan but they…

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Aggressive Fed, Tough Sell

By Econ70 | 03/30/2011

We know the Bernanke lead Fed is willing to be extremely aggressive. But as we saw in 2010 the hurdle is high for more Quantitative Easing. We need evidence of A) a double-dip B) a stock market correction of at least 15 or 20% and C) the real prospect of deflation. But if headline inflation…

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Myth Busting 101

By Econ70 | 03/04/2011

Is deflation all that bad? It’s considered bad in part because consumers postpone purchases today to get a better deal tomorrow, weakening demand. Is this true for food, gas, haircuts and electricity? NOT! And how about consumer electronics? The laptop/ipod/hard drive/flatscreen TV you just bought will be worthless in 2 years! Did that stop you…

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