This is different...much different.
As dozens of countries slip deeper into financial distress, a new threat may be gathering force within the American economy — the prospect that goods will pile up waiting for buyers and prices will fall, suffocating fresh investment and worsening joblessness for months or even years.
The word for this is deflation, or declining prices, a term that gives economists chills.
Deflation accompanied the Depression of the 1930s. Persistently falling prices also were at the heart of Japan’s so-called lost decade after the catastrophic collapse of its real estate bubble at the end of the 1980s — a period in which some experts now find parallels to the American predicament.
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Not since the Depression have so many countries faced so much trouble at once. The financial crisis has gone global, like a virus mutating in the face of every experimental cure. From South Korea to Iceland to Brazil, the pandemic has spread, bringing with it a tightening of credit that has starved even healthy companies of finance.
“We’re entering a really fierce global recession,” Mr. Rogoff said. “A significant financial crisis has been allowed to morph into a full-fledged global panic. It’s a very dangerous situation. The danger is that instead of having a few bad years, we’ll have another lost decade.”
http://www.nytimes.c...flation.html?hp
Edited by milbank, 01 November 2008 - 12:50 AM.
