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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: bentway who wrote (367655)	1/21/2008 3:42:59 PM
From: tejek	Respond to of 1571635

But, the housing wasn't counted when we were calculating the INFLATION - why should we count it when calculating DEFLATION Its more complicated than that......declining housing prices reduces the amount of lending and decreases the liquidity in the economy. With little new housing, demand for products drops off causing prices to fall as inventories increase. The problem is particularly severe now because of the suspension of good lending practices during 2005 and 2006. That has increased the number of gov't investigations and caused lenders to go the other way and become very, very conservative in their lending practices, with loans dropping off a cliff after August. That has further exacerabated the down and out housing industry, decreasing demand even further. That's why I see current conditions leading to a deflationary spiral.