Spain on the verge of deflation: Krugman's great fear for the U.S.:

[amborin]

".....Prices dipped everywhere, from restaurants and fashion retailers to pharmacies and supermarkets in March.

snip

The nation’s jobless rate, already a painful 15.5 percent, could soon reach 20 percent, a troubling number for a major industrialized country.

With the combination of rising unemployment and falling prices, economists fear Spain may be in the early grip of deflation, a hallmark of both the Great Depression and Japan’s lost decade of the 1990s, and a major concern since the financial crisis went global last year.

Deflation can result in a downward spiral that can be difficult to reverse. As unemployment rises sharply and consumers cut spending, companies cut prices. But if sales do not pick up, then revenue can decline further, forcing more cuts in workers or wages. Mr. Maestre is already contemplating additional job and wage cuts for his 250 employees.

Nowhere is this cycle more evident than in Spain. Last month, it became the first of the 16 nations that use the euro to record a negative inflation rate. The drop, though just 0.1 percent, had not happened since the government began tracking inflation in 1961, and Spanish officials have said prices could keep dropping through the summer.

Some of the decline came as volatile food prices sank; the cost of fish fell 6.2 percent, and sugar was down 5.7 percent. But even prices in normally stable sectors like drugs and medical treatments fell 0.7 percent in March, and there were slight declines in footwear, clothing and prices for household electronics.

“Alarm bells are going off,” said Lorenzo Amor, president of the Association of Autonomous Workers, which represents small businesses and self-employed people. “Economies can recover from deceleration, but it’s harder to recover from a deflationary situation. This could be a catastrophe for the Spanish economy.”

Deflation is not just a Spanish concern. Luxembourg, Portugal and Ireland have reported price drops, too. While the declines have been slight — and prices rose modestly after factoring out food and energy prices, which can fluctuate widely — other figures released this month suggest the risk of deflation is growing....."


<http://www.nytimes.com/2009/04/21/business/global/21deflate.html?ref=business>

[Laelth]

1. Yikes! n/t

:dem:

-Laelth

[BeFree]

2. Bubbleheads

The bubble fart of gas prices blew everything out of proportion and Kruggie thinks it should stay inflated? What kind of economy is he smoking?

[amborin]

4. sounds as if

you haven't read Krugman, or any economics for that matter

deflation is a real threat

it will be yrs before we have to worry about inflation

we've already seen some prices fall here in the U.S.

[BeFree]

5. Wipe this

The inflation is gas prices over the last few years.

"it will be yrs before we have to worry about inflation"

Do you even know what economy means?

[SoCalDem]

3. Fixed income retirees might enjoy living in Spain

maybe it's a new place to investigate..They would pump some money into the economy too:)