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Fed's Bullard warns of deflation By JEANNINE AVERSA AP Economics Writer Advertisement Buy AP Photo Reprints Interactive Multimedia Bios: Key Players on the Fed Your Questions Answered Ask AP: State stimulus plans, buying Iraq's oil WASHINGTON (AP) -- With the economy spinning deeper into recession, the country might suffer a dangerous bout of falling prices, or deflation, a Federal Reserve official warned Tuesday. "I think we face some risk - at this point only a risk - of sustained deflation," James Bullard, president of the Federal Reserve Bank of St. Louis, said in a speech to the New York Association for Business Economics. A government report, released last month, showed that consumer prices tumbled in December, and inflation last year logged its smallest advance since the early 1950s, fanning new fears that the country may face a dangerous bout of deflation. Falling prices sound like a gift at first - at least to consumers. But a widespread and prolonged decline can wreak more havoc on the economy, dragging down Americans' wages, and clobbering already-stricken home and stock prices. Dropping prices already are hurting businesses' profits, forcing them to slice capital investments and lay off workers. "Ongoing deflation in the United States might be particularly pernicious," Bullard said. To fend off any deflationary threat, the Fed is expected to hold its key interest rate at a record low for the rest of this year. America's last serious case of deflation was during the Great Depression in the 1930s. Japan was gripped with a period of deflation during the 1990s, and it took a decade for that country to overcome those problems. "In some ways, our current environment parallels the Japanese experience after 1990," Bullard said. "The Japanese banking system encountered difficulties with 'troubled assets' and the intermediation system broke down. That is an experience that neither we, nor the rest of the world's economies, want to repeat."
Originally posted by Jay-in-AR
reply to post by The Vagabond
To be honest. Nobody. At least not yet.
America is still vastly superior in that respect to everyone else on the planet.
Often times people look at the ground conflicts that we have waged recently as an indicator of our military strength. However, if THAT were to happen, we wouldn't conduct our business as usual type warfare. It would be devastating.
That being said, I'm still waiting for China to dump the dollar. Just not yet. They need to buy some more stuff first.
Originally posted by TaZCoN
I have no idea what they are saying...but the guys on Karl Denningers forum
are seriously freaking out.
Talking as if global financial meltdown is indeed in progress.
Sorry if this is against the rules but here is the link
What the **** is going on with Currencies?!
The mushrooming crisis has already started to spill over into Germany's debt markets, lifting credit default swaps on German five-year bonds to a record 70 basis points. The gap between French and German CDS spreads has narrowed abruptly for the first time since the credit crisis began.