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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: Oblomov who wrote (126610)10/1/2001 3:42:15 PM
From: Tommaso  Read Replies (1) of 436258
 
That might just be what happens, but only if people paid down debt and refused to spend freely, would the price of goods fall. If housing prices, in particular, fell enough to encourage people to wait before buying, a lot of real estate could get stuck unsold--not as fast the the airlines (and, I understand cruise lines) are going broke.

The liquidation of debt might contract the money supply faster than the Fed can inflate it.

When you look at the recent monetary figures, inflation appears to be inevitable. But a sudden shift in saving habits could counteract that.

Having responded to imaginary crises in 1998 and 1999, the Fed has few resources left for a genuine crisis.
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