CNN Money: Consumer prices in record decline!

Discussion in 'Political Discussion' started by PatriotsReign, Nov 19, 2008.

  1. PatriotsReign

    PatriotsReign Hall of Fame Poster

    #18 Jersey

    More evidence that declining prices are NOT good for the economy!

    Consumer prices in record decline

    "Inflation falls by a record 1% in October, worrying economists that falling prices will become a disturbing trend

    The Consumer Price Index, a key inflation reading, fell 1% last month, according to the Labor Department. That was much weaker than September's flat reading and exceeded the 0.8% decline a consensus of economists surveyed by had forecast.

    Prices fell by the greatest amount since the Department of Labor began publishing seasonally adjusted changes in February 1947.

    The issue of consumer prices has changed dramatically in recent months. For most of the year, inflation, driven by high energy prices has caused consumer prices to soar, reaching a 17-year high in July.

    Now, economists are worried about deflation - the opposite of inflation. Falling prices may be a welcome sign for consumers in grocery store aisles and filling up at the pump, but deflation is generally a bad sign for the economy. "

    Consumer prices in record decline - Nov. 19, 2008
    Last edited: Nov 19, 2008
  2. Tunescribe

    Tunescribe Supporter Supporter

    #61 Jersey

    Why are declining prices not a good thing if they were over-inflated to begin with? Like with the stock market, "corrections" happen. Housing prices were over-inflated, why shouldn't this apply to consumer goods as well? I'm waiting to see if property taxes drop in accordance with the drop in housing values.

    It's common sense in a market economy. I'm more apt to wait, comparison shop, and spend money on a "bargain" than meet an unfair asking price. It makes sense that consumer goods prices follow the trend of oil prices anyway.
    Last edited: Nov 19, 2008
  3. PatriotsReign

    PatriotsReign Hall of Fame Poster

    #18 Jersey

    It's not necessarily a "bad thing" when viewed apart from it's affect upon the economy. But all the things you listed (stocks & real estate) that are declining are what defines a recession, so it's viewed a "bad" sign for the economy.

    Lower prices on everything mean lower revenues & profits for corp.'s. It means consumption and demand are declining and that all means increased unemployment. The higher unemployment goes, the more demand & consumption decline regardless of lower prices because people are not willing to spend any saving they incur from lower prices.

    It all ends up being a vicious cycle that will only end when it all bottoms out.
  4. Tunescribe

    Tunescribe Supporter Supporter

    #61 Jersey

    So it simply needs to bottom out and then rebuild to a reasonable level of sanity and equilibrium. It appears to me that our society's excess credit-driven consumerism has finally hit critical mass and people are being "spanked" into realizing you can't have what you can't pay for. We're being forced to "grow up" and act like responsible adults for a change.
    Last edited: Nov 19, 2008
  5. Real World

    Real World Moderator Staff Member

    This is where you have trouble. Falling prices are good for an economy as it spurs consumption, and puts more money in the pockets of the people who consume. What you need to say is,

    "Declining prices are a bad sign for the economy."

    There is a significant difference in stating the former, versus the latter. Tumbling prices tend to mean a market correction, which is usually tied to an economic downturn, or recession. When someone tries to point this out, you get all hysterical and start spamming like a....nevermind. :D
    Last edited: Nov 19, 2008
  6. PatriotsReign

    PatriotsReign Hall of Fame Poster

    #18 Jersey

    Now we're getting somewhere RW...almost anyway.

    Falling prices are bad for an economy in recession but not for a healthy economy. Is that better?

    Declining prices are not just a bad "sign" in THIS's bad period. But any other time, it's always a good thing. I guess I should have clarified that a long time ago, huh?:confused:

    I actually asked the mods to change the title of my other thread from "Declining prices bad for the economy" to "Declining prices bad sign for the economy"

    But they haven't had a chance to change it
    Last edited: Nov 19, 2008
  7. Fogbuster

    Fogbuster Pro Bowl Player

    Yea, I'm with you on this. How can this be a "bad" thing???? If the entire U.S. credit system was artificially inflated due to stupidly cheap unsecured mortgages for about 30 years -- with home prices out-stripping the base line rate of inflation by 3:1 or even 4:1 at the end -- how can a natural come down of the overall artificially spiked inflation rate be "wrong"????

    Sounds like more ivory tower liberal gobble-gook to me. Robert Reich must have a hand in this.

  8. godef

    godef In the Starting Line-Up

    It all has to do with how "economy" is defined. Unfortunately, many today considers a robust economy as one which makes you EZ money, eg the former housing bubble, the former skyrocketing barrel of oil, all boosted in recent times by almost pure speculation. Paper money making more paper money.

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