In the Guardian, there’s an ominous article on the looming prospect of deflation. It’s when people buy less, so prices fall, so companies make less money, so people lose their jobs, so they buy less, so prices fall…
While inflation tends to reduce the “real” size of debt over time, the ones who get to suck deeply on the exhaling ass of deflation are those with a lot of debt — students, start-up companies, the unemployed. The kind of people who could really use a fat tax break on their capital gains.
It’s a very hard cycle to break. Japan has been in deflation for a decade. The last major period of deflation in America was that whole “Depression” thing in the 30’s.
But let’s try to look on the bright side…
And you knew who you were then,
Girls were girls and men were men,
Mister we could use a man
Like Herbert Hoover again.
Also from the Guardian, spreading the love:
Stock markets fell sharply around the world yesterday as fears that the Bush administration is deliberately driving down the value of the dollar led to a headlong flight out of the US currency and nudged the euro close to a record high.
“America has launched its own weapon of mass destruction,” said Nick Parsons, a currency strategist with Commerzbank. “The US solution to deflation is to export it to the rest of the world.”