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Wed Jan 28, 2015, 10:46 PM

 

Deflation fears rock markets again but consumers see windfall -- for now

or the fourth time in 12 years, the world is facing a deflation scare. And as with any good horror movie, no one is sure what lurks in the shadows..

Since summer, slowing growth in China and severe weakness in Europe and Japan have deepened fears that the global economy could tip into deflation a sustained period of falling prices for goods and services. Those concerns mushroomed in October as crude oil prices collapsed and nervous investors poured into the relative safety of government bonds, driving yields on some bonds to record lows.

The new year kicked off with another dive in oil prices and bond yields and a slump in stock prices...But if deflation takes hold, it would mean different things good and bad to different consumers, workers and investors. Japan, after all, had been stuck in a deflationary rut since the late 1990s...

But policymakers blanch at the thought of broad, sustained deflation in times of economic weakness because of memories of the Great Depression.

The worst-case scenario: A financial crash causes demand for goods and services to fall as worried consumers and businesses cut spending. As demand dries up, prices drop. That slashes businesses' sales and earnings, triggering widespread job and pay cuts. Demand for goods and services weakens further, prices fall again and a vicious spiral ensues.

http://www.latimes.com/business/la-fi-investing-quarterly-deflation-20150111-story.html#page=1


seems like we're already experiencing the "widespread job and pay cuts."

3 replies, 748 views

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Reply Deflation fears rock markets again but consumers see windfall -- for now (Original post)
ND-Dem Jan 2015 OP
Recursion Jan 2015 #1
ND-Dem Jan 2015 #2
GummyBearz Jan 2015 #3

Response to ND-Dem (Original post)

Wed Jan 28, 2015, 10:54 PM

1. No, we've been seeing pretty impressive job gains lately

The worry is that this will stop and we'll go back to the unemployment levels of 6 or 7 years ago.

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Response to Recursion (Reply #1)

Wed Jan 28, 2015, 11:47 PM

2. what does that have to do with the OP? which is about deflation, not jobs?

 

(nevermind, I see the bit you were responding to....)

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Response to ND-Dem (Reply #2)

Wed Jan 28, 2015, 11:52 PM

3. Job gains..

 

Yea, all the decent blue collar union jobs paying a living wage recently vanished but hey, Wal-mart and McD's need cashiers. That is where the jobs "gain" is at. And that will in fact promote deflation, since the new wages will be lower than the previous job's wage

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