Forget inflation for now. Prices are falling on almost everything, including stocks.
Investors need to adjust to a new reality: A few months ago, inflation was a top worry, especially the impact of sky-high fuel prices. Now, although consumers can celebrate falling prices at the gas pump, investors' worry is exactly the opposite.
Instead of inflation, the problem is deflation, a downward drift in prices that could squeeze corporate profits and investor returns to uncomfortable levels.
This article talks about some trends and problems relating to deflation.
1 comment:
This is very crazy! Normally, when the Fed's wants to pump up the economy, they increase money supply by cutting interest rates. One of the drawbacks of cutting interest rates should be a surge of inflation. In this case, despite Fed's continuously lowering interest rates, the economy remains rather unchanged, consumer spending remains low and there is no inflation. Clearly, nothing works as we expect. Monetary policy fails to work!
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