K-Rod cited a yahoo finance report of how once again, lumber prices (and hence the building industry) are not doing so well. The article was good as far as it went, but then it went too far and cited the idea that deflation is even worse than inflation for the economy as a whole.
Really? For contrast, here is a graph of the CPI since 1913. Notice that the last significant deflation we've seen in our nation occurred in the 1920s and 1930s. The 1920s, of course, were the Roaring Twenties, and the 1930s were the Great Government Caused and Sustained Depression.
Not that I'm biased, of course (I am), but reality is that the data do not support the idea that deflation is an enemy of the economy; it's associated with both booms and busts. Savers love deflation, and borrowers hate it. The traditional bias against deflation comes from the fact that (see Harry Browne's works on the subject) that a wartime boom caused by spending features inflation, and the postwar bust--or hangover from the wartime boom really--tends to feature deflation. Keynesian economists--often untrained in logic--confused correlation with causation, and therefore assumed that deflation was the enemy, while the real problem was government.
Hopefully my gentle readers can do bettter than Keynes, Hoover, Obama, and Roosevelt in this regard.
The Cranach Super Bowl party! - You are all invited to the Cranach Institute virtual Super Bowl party! It will be located at this blog and it will last all weekend. Please bring your ow...
5 hours ago