"that deflation talk"
is not baseless.
the fact is pricing power is practically non existent for the things a person *wants* to buy, but there is pricing power in the things we *must* buy....
some might call that a recipe for stagflation, and to an extent i agree with that ....however
"that deflation fear" is very real...especially in a jobless "recovery" ....when jobs dry up, demand diminishes... over supply/capacity has to be cut, meaning prices will fall....
it's that simple.
the fear of a downward pricing spiral is very real.
there is something called secondary deflation
i posted this on another thread a while back when discussing deflation and inflating housing assets
Message 19003113
not sure if we are here, but i think this is a plausible explanation for the seemingly incongruent concerns over deflation and a housing bubble (that being generational interest rate lows creating a bubble in housing demand while manufactured goods, some services and certainly incomes are falling and pointing toward deflation concerns)
auburn.edu
Mainstream theory distinguishes between broadly conceived structural unemployment (a mismatch of job openings and job applicants) and cyclical unemployment (a decrease in job openings). In the Austrian view, cyclical unemployment is, at least initially, a particular kind of structural unemployment: the credit-induced restructuring of capital has created too many jobs in the early stages of production. A relatively high level of unemployment ushered in by the bust involves workers whose subsequent employment prospects depend on reversing the credit-induced capital restructuring.
The Austrian theory allows for the possibility that while malinvested capital is being liquidated and reabsorbed elsewhere in the economy's intertemporal capital structure, unemployment can increase dramatically as reduced incomes and reduced spending feed upon one another. The self-aggravating contraction of economic activity was designated as a "secondary deflation" by the Austrians to distinguish it from the structural maladjustment that, in their view, is the primary problem. By contrast, mainstream theories, which ignore the intertemporal capital structure, deal exclusively with the downward spiral |
