I keep hearing all this talk about inflation. But what I think is really occurring is deflation. Prices are actually going down on things, although you would expect otherwise because the government is printing money at unprecedented rates. And we have been taught to respond to that and expect the situation to be just the opposite.
Out of Work and No Buying Power
However, many people are out of work and are engaged in other activities other than buying. As a result, retailers are left with excess inventory and in turn must charge less to move the items. In a recent article in the Wall Street Journal, entitled "Prices Drop but Threat of Deflation Is Remote" on May 15, 2009, it suggests that a myriad of prices fell, except for housing.
We Could Experience Deflation for a While
Industrial output is said to have tumbled 1.7% between the months of March and April, above the rate that had been estimated of 1.5%. Because of these events and manufacturers using up excess inventory, I don’t believe that inflation will happen for some time to come. Contrary to the aforementioned article, deflation will exist for the near future.