Weatherdem's Weblog

Bridging climate science, citizens, and policy

First Year-Over-Year Consumer Price Decline in Half a Century

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The effects of Con economic policies continue to roll in.  This morning, it was reported that consumer prices dipped again in March.  That means that inflation over the past year fell at the highest rate in over 50 years.  Clearly, the effects of large-scale layoffs, record foreclosures and a worsening recession continue to be felt.  Long-term falling inflation numbers constitutes deflation.  It’s a horrible economic cycle, as the Japanese of the 1990s and 2000s can attest.  The biggest deflationary period on record was the 1st Republican Great Depression.  It remains to be seen whether we’re in the midst of the 2nd.

I wanted to point out once again the absurdity of the corporate media repeating numbers of inflation vs. so-called “core” inflation.  “Core” inflation takes out more volatile products like energy and food.  It is somehow supposed to give economists a better picture of how the economy is performing.  Unfortunately, the vast majority of Americans, who are in the middle- and lower-class socio-economic bins, actually have to pay for energy and gas on a somewhat regular basis.  We can’t really exclude food from our weekly and monthly budgets.  It’s sort of a necessity.  Thus, every wild swing in food prices is keenly felt by most Americans.  Taking it out of the inflation calculation might work in a theoretical sense, but it doesn’t make any sense in the real world.

As most of us in the reality-based community are aware, the spending authorized in Obama’s recovery and reinvestment plan is designed to at least ease the deflationary spiral we’re caught in.  More preferable would be a reversal of deflation – getting an economic expansion underway.  I personally don’t think the Obama spending was enough to get an expansion going.  I think additional government stimulus will be needed.  Nobody seems to really want to address the fact that Americans lived way beyond their means for decades.  Even $700 billion in stimulus spending won’t change the impacts of lenders tightening their lending policies and credit markets remaining frozen, to say nothing of 6 million plus lost jobs.  No, we won’t see the end of this recession any time soon.  The Cons weakened our economic fundamentals too much for that to happen.  Will the spending and its effects be enough to establish a bottom to the crisis?  I hope so.   I think an important question is how long will we be stuck at that bottom.

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