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Biotech / Medical : Biotech Valuation
CRSP 57.66+1.4%3:30 PM EST
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To: A.J. Mullen who wrote (8304)5/8/2003 3:29:55 PM
From: Biomaven  Read Replies (1) of 52153
 
(continuing OT on deflation)

I've always viewed a modest amount of inflation as oil to keep the economy moving. A key issue is that many prices (like wages) are very resistant to decreases in nominal terms. The only palatable way to drop wages is via a few years of wage freezes or less-than-inflation raises.

If there is prolonged deflation I predict either labor troubles when firms try to cut wages, or unemployment when they shrink jobs instead (or just go out of business).

Note also that real interest rates rise when you get deflation - nobody (except maybe some Japanese consumers) are going to suffer negative nominal interest rates.

Peter
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