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Strategies & Market Trends : ahhaha's ahs
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To: GraceZ who wrote (3427)11/5/2001 11:17:22 AM
From: ahhahaRead Replies (1) of 24758
 
Roach claims "History tells us that recessions trigger deflationary forces." Since the advent of an activist, interventionist FED in the '60s, that hasn't been the case. The CPI advanced in every recession including during the mild depression of the '80s. The strongest claim he can make consistent with the data is that recessions slow the rate of growth of the CPI.

Roach also claims that recessions wring out previous excesses, but not so when FED can practice counter cyclical policy. When the FED does that during the ensuing recovery corporations use the FED stimulated increase in aggregate demand to raise prices. The prices stick because not enough pain was allowed to be inflicted on labor to mute the will to quickly demand compensation in excess of output.
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