Investing in Deflationary Times
Jim Kingsdale submits:
“Deflation, The Economic A-Bomb: make no mistake, the most difficult problem we can face would be deflation. It is a virus in the economy that seizes upon the public mind and causes a vicious cycle of reduced spending, reduced production, and reduced profits. As Krugman recently noted, the deflation of the 1930’s came about during the interregnum between Hoover and Roosevelt. None of the downturns since the Depression has included deflation. Let us hope this one does not either.”
Now, just less than a month later, the jury seems to be decided. It is looking like deflation is exactly what is occurring in the U.S. economy and probably in many others. One tiny personal example: I’ve been planning to switch from a PC to a Mac for a few good reasons, but I don’t need to do it immediately. It’s about a ,000 purchase all totaled, which I probably would have made just on an impulse in earlier times. But today I decided to put off the purchase and I shocked myself to discover why: It’s because I’m pretty sure that in a few months the Mac will be a few hundred dollars cheaper.