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corysub -> RE: Are we entering a period of both inflation and deflation? (10/18/2008 10:15:49 PM)
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I don't believe it would be possible to have a simultaneous period of "inflation" and "deflation"..Inflation refers to the rate of price increase either by demand exceeding supply, and deflation is supply exceeding demand, importantly due to the price of labor and raw material. The significant growth of the Chinese economy stimulated by their very low cost of labor (and in addition keeping their cost of goods sold COGS low by product dilution) has had important deflationary impact on global pricing. It would seem that quite possibly this could be moderating. The bursting financial debt bubble created by the availability of cheap money chasing real estate was inflationary, as was the Chinese and Indian economies blasting their way onto the world commodity markets to feed their growing need. This all exploded with the increase in interest rates in recent years, and the impact has just started to hit the world economy.
If the programs being put into effect by the worlds Financial Ministers do not work to relieve a frozen banking system, what you could see is not a period of inflation/deflation...but a period of "stagflation" which Webster defines as a persistent inflation combined with stagnant consumer demand and relatively high unemployment...and possible "depression". During the Great Depression...dunno why they called it "Great", unemployement got to around 25% I believe. Not a good thing.
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