Spread this message with Digg, Del.icio.us, Reddit, or Stumbleupon, and subscribe to the RSS Feed to track articles

Economists Fear Deflation, Say it Will Further Devastate Economy

Published 11/21/08 Dustin Ensinger - Print Article
E-mail - editor@economyincisis.org

With worldwide demand plummeting for everything from oil, to cars, steel and corn, there is growing fear that deflation could drive economies around the world further into recession.

"It's hard to see any prices that haven't fallen," said Iowa State University agricultural economist Chad Hart.

The price of a barrel of oil is at its lowest level since may 2005. The price of a bushel of corn fell by 50 percent since the summer. Overall, Oct. witnessed the steepest drop in consumer prices since the Labor Department began keeping track of those figures in 1947.

Last month retail prices for apparel were lower than the prices in 1989, without adjusting for inflation.

"A $20 shirt today, that same shirt in 1989 was $20," said Charles McMillion, an economist who runs MBG Information Services. "That's fairly amazing."

Analysts worry that deflation will only plunge economies deeper into turmoil as more and more consumers put off purchases waiting for even cheaper prices or perhaps sunnier economic times. However, the economy will not improve unless consumers spend.

"Everyone is having these huge sales, and consumers know if they wait longer, the chances of them not having a good selection is fairly small and the chances are that the prices will be lower," said McMillion. "So why buy today? This is exactly why economists are always scared to death of deflation."

Source The Washington Post:

With the stock market crumbling and the economy shrinking, a whiff of deflation is in the air.

Oil prices yesterday slid below $50 a barrel to the lowest level since May 2005; stores are advertising sales on the eve of what should be peak holiday shopping season; and worldwide demand for items as varied as steel, petrochemicals and clothing plunged in October.

Click Here For Solutions To America's Economic Problems

Click here to contact your Representative in Congress.

Unless the above article is already copyrighted, this article is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License, EIC grants permission to use this article in whole or in part provided attribution is given, preferably in the form of a link back to EconomyInCrisis.org.