Prices fall but consumers wary

Detroit News ^ | June 22, 2003 | Sarah A. Webster

[sarcasm]

DETROIT -- For years, the nation's economic watchdogs were focused singularly on fighting inflation. Now they are muttering about deflation.

Prices for cars, clothes and many other retail and manufactured goods are falling. But health care, college tuition, housing and many service costs are rising sharply.

[sarcasm]

[meenie]

Add all these statistics up and then realize that any increase in economic activity is sparked by more debt rather than generated profits and we are in a real pickle.

[sarcasm]

Debt?

Possibly the biggest worry cited by market bears is the still rising level of household, business and government debt. It has reached a staggering $32 trillion, or almost 300 percent of U.S. gross domestic product, according to Ned Davis Research. Servicing that debt has already become a challenge for households and business firms.

[waterstraat]

Deflation is not a bad thing anymore. There are few family farms left, and all of our factories/producers are moving to foreign lands, so deflation does not cause the same kinds of problems when you produce nothing. We are a service economy now, and deflation does not hurt a service economy.

[Beck_isright]

"We are a service economy now, and deflation does not hurt a service economy."

Bzzzzzzzzzzzt. Wrongo. Deflation kills debtors. This will destroy what's left of the retirement programs and kill state and local governments who have run up huge debts. Oh, and the little guy who has 30% plus of his annual income tied up in debt, he's really screwed.

[waterstraat]

The debt does not change: if you owe $100,000, then you still only owe $100,000, except that you can refinance to lower the payments even more. Retirees will benefit from lower prices, and will be able to live better than currently with cheap prices on chinese and mexican made goods, and lower rent payments. State and local governments will continue to get whatever money they want, that has not changed for a hundred years.