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The Real Risks Of Deflation


At first, lower prices don’t sound like a bad thing. But if stores need to drop prices in order to sell stuff, that means lower wages for workers which means less money going back into the economy, which means less being bought, which means prices start to drop more and you can see that the spiral keeps going down, down, down.

CBS has the story…

October saw a 1% drop in the Consumer Price Index, which is the largest single month drop in over 61 years. True, some of that was due to gas prices, but certainly not all, and if this keeps up (mixed with a likely mediocre shopping season), Obama will have to address this problem along with all the budget shortfalls.

That’s why I said yesterday that what you’ll probably see from Obama next year is a massive stimulus package (long term solution) mixed with the printing of more money to drive inflation (short term solution).

More as it develops…