What matters to each person is how prices compare to their income and assets.
During the Great Depression prices declined. This made you wealthy if your income did not decline much. Or it made even purchasing food difficult if you were unemployed, or if the value of your assets declined sharply no matter - how wealthy you were previously.
Unemployment clearly has a powerful effect on the cost of goods and services and the price of things which depend on aggregate income, such as rents. I see and hear about this in Los Angeles in a State now with reported unemployment of 11.8%.
A friend with an apartment building with 2 bedroom 2 bath apartments built in a nicer older style with hardwood floors and crown moldings etc gardens, great location 1,450 sq ft, had seen her rents peak at $2,350 a month. After 14 months of vacancies she finally leased one for $1,750 a 25% decline. Her rental income is down even more, 60% because of the vacancies. This only works because her building has no mortgage. If there were a mortgage she would have needed to be far more aggressive in reducing rent rates. Some had the notion that as people left their foreclosed homes, apartment rents would rise. That idea hasn't worked out so well.
I've seen the cost of most services decline and people offering "recession-proof" "must-have" goods and services have seen their sales off sharply. Many firms, such as cable television, are holding tough on their posted prices as their sales drop, but those people who call to cancel their service are offered "special discounts" of up to 50% off the posted rates. I have a friend who has been very aggressive about this and is now receiving the Los Angeles Times for 50% of his former rate and his cable for 30% less for a year with free premium channels thrown in.
The GDP in America and many nations, show minor declines, but the picture changes when you exclude new governmental stimulus spending. Remove this spending and the demand for all goods and services would decline even more sharply, with corresponding reductions in price.
The price of goods with a global market obviously depend on the strength of the real global economy, and locally with the strength or weakness of your home nation's currency. Many nations claim to be affected minimally, but as an example, China's economy is now also heavily a figment of their own government stimulus spending.
It appears a goodly portion of this Chinese stimulus spending went into asset speculation creating the recent appearance of global price inflation, most prominently with copper prices. Chinese state owned enterprises (SOEs)have purchased mega amounts of actual copper stockpiled in warehouses and bought even more on the futures markets.
Now as Snowshoe posted, "China’s State-owned Assets Supervision and Administration Commission (SASAC) has sent notice to six foreign financial institutions informing them that several state-owned enterprise will reserve the right to default on commodities contracts signed with those institutions. Some "inflation" that proved to be.
english.caijing.com.cn
I've estimated that removing the excess global consumer and business debt will bring income levels back to levels of eight years ago once everything has stabilized. In the interim, excluding government spending, the effect will be far worse.
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