"Ignoramus27079" wrote in message
...
On 2008-10-31, Wes wrote:
Ignoramus27079 wrote:

''... the Commerce Department reported that inflation was at 4.2 percent
in
September compared with a year ago, down slightly from the 4.5 percent
annual gain in August. Outside of food and fuel products, prices
climbed 2.4 percent, above the Federal Reserve?Ts preferred ceiling
of 2 percent.''


Iggy,

I enjoyed filling my tank for less that 20 bucks (small car), then I went
into the big
grocery store and noticed my savings had been grabbed by cost increases
in food.

Btw, how is a quart of no-name motor oil priced at 2.89 a quart with gas
is down to 2.22
in my area?


Good question. I think that deflation has not yet materialized.

That's the third month in a row that inflation has dropped, Iggy. And if
you're worried about deflation (quite a few of the world's economists are,
for reasons I'm sure you understand), the price of gasoline dropping from
$3.50 to $2.20 (it's $2.21 today here in NJ) is enough to set off alarm
bells.

We aren't there yet, but what economists are looking for now is signs that
we're going into something like Japan's "lost decade," the 1990s. With the
overnight rate at 1%, the Fed is out of gas and out of tools, except for the
weaker ones of lowering longer-term rates. If there's a further drop,
printing money and creating make-work jobs are the only tools left. And if
companies still don't want to borrow after that, as happened in Japan, we're
in for a hell of a bad ride.

Cheap gas may feel good now. It's certainly a relief. But to economists,
it's a sign of real danger ahead. Once deflation takes hold, there are no
remedies. You just have to wait it out -- typically, for around a decade.

Whoever is president, the likelihood is high that he'll have to pull out the
stops with fiscal measures the likes of which we haven't seen for decades --
and this, in an extremely unfavorable environment for further deficit
spending.

Brace yourself. We'd better hope that things turn up late in the first
quarter, as some business leaders think will happen. Otherwise, deflation
will drive us into a dead-man spiral.

--
Ed Huntress