Falling prices aren’t necessarily bearish for jobs, profits or growth
By Richard Salsman
Fears of “deflation” are widespread. By one account, “the scare word whispered around Washington these days is deflation, which means a falling price level and sometimes implies a stagnant if not collapsing economy.” The “scare word” also spooks the U.S. Federal Reserve, which is now planning to print US$600-billion in more paper money, even though it has already tripled its balance sheet since 2008, and even though currency-gold prices, the world’s most sensitive inflation indicators, have skyrocketed by 16% to 41% in the past year (depending on the currency), and by an average of 26%.
In the past, gold-price jumps of such magnitude, which always mean a depreciation in the real purchasing power of paper money, i.e., inflation, have been bearish for equities and growth.
Read more: http://opinion.financialpost.com/2010/11/11/the-deflation-myth/#ixzz15LpfjWVC