While perusing my Pocket Express by Handmark the other day I came across Scott Burns’ article concering the future of our economy titled High Debt Means Deflation, Not Inflation. It’s worth the time to jump on over and read.
Interestingly enough it seems to be a growing train of thought as not too long ago I read something of a similar vain in I think the Wall Street Journal. (Can’t remember as I read all the time.) I just remember the author talking about how we are basically resetting our economy. A re-boot if you will. That good times won’t come back simply just because Bush and Obama want it to and pour literally trillions and trillions of dollars into a bucket wherein they hope a stimulus will be born.
The most interesting item from the Burns article:
“When you have major debt events, it changes our behavior for a long time. We’ve had a record decline in wealth. But the income effects are far larger. Payrolls have seen the largest drop since 1948. We’re at a six-decade low in factory utilization. The output gap (the difference between what we could produce and what we are actually producing) is the largest in history.”
That means rising demand, if it occurs, won’t cause rising prices.