Gimme A D!

I was somewhat down in the dumps this morning, facing a new week, thinking about further layoffs and the unemployment numbers that came out Friday. Then I opened up the newspaper and what did I find on the front page?
"Obama's Advisers Warn of Deflation," the main story of the day in the Kansas City Star.

Suddenly, being an optimist seems a whole lot easier.
Deflation! Yay! Now I have something to cheer about! We've watched for years as college tuition, health care and last year, groceries, went up and up. We've felt left behind as a whole lot of electronic gadgets became "must haves" along with a monthly connection fee. We've seen home heating charges go up by double digits again and again. With deflation, maybe now we'll at last have a chance to catch up. Hell, yeah!

I wasn't too far into my daydream of money left over at the end of the pay period when I realized that one of the headline words seemed off. "Obama's Advisers Warn of Deflation." Shouldn't it have said "promise?"

It turns out, though, that we're supposed to fear deflation. The adviser quoted said that a downward price spiral would be difficult to get out of. Theoretically, people would just hold off buying things forever because they expect the price to keep going down and down.
You see, dear reader, deflation might make things momentarily good for buyers, but very bad for sellers.

To which I say: Yes. That is what is known as a "buyers' market."
This is what I always thought was supposed to be so great about free market capitalism. When goods become scarce, the price goes up. Apparently, though, the free market isn't quite as majestic when prices are going down.

As for the idea that people will put off buying. Well, let me tell you about our stove.
It's a gas stove that came with the house. The electric ignition no longer works on the burners. The temperature below 350 degrees is no longer trustworthy. And opening the broiler drawer causes a hideous shriek so nauseating that I avoid broiling at all costs. We've waited through our kids' college to get a new stove. If the prices on those things came down even a tiny bit, I would do a little dance in the street then run right to the store, money in fist. Ditto the refrigerator, washer/dryer and hot water heater.

I'm betting there are a lot of people who, like us, have slipped backwards the past few years. In fact, if you believe various reports, there are all kinds of people who have been putting these purchases off for years and will not wait indefinitely.

About the only way deflation could be bad would be if it caused our income to go down. Oh wait. No raise this year. Higher health care. No 401K match. That's already happened.

So don't think of it as deflation. Think of it as "adjustment."