Edging Around the Drain

From yesterday's news:

Consumer prices over all fell in April by 0.1 percent, the Labor Department said in its monthly report on Wednesday. The decline was the first since March 2009. Prices rose by 0.1 percent in March 2010.

...

But without the volatile prices for food and energy, the core index for consumer prices remained flat, as they did in March. Over the 12-month period that ended in April, the core index rose 0.9 percent, which economists said was the lowest it has been since the 1960s.

Other costs that fell in that period included housing, down 0.7 percent, and apparel, down 0.9 percent, the largest decline of all the nonenergy components.

This is not good news, at least in my opinion. This is way too close to deflation to suit me.

If you think inflation is bad, deflation is worse. Deflation gives people an incentive not to buy anything other than bare necessities, for the money that is not spent now becomes worth more. In a deflationary time, what is economically best for individuals becomes economically suicidal for society as a whole.

If you think 10-15% unemployment is bad, if we get into a deflationary spiral, 15% unemployment will look like the good old days. Millions more will be out of work. Those fortunate enough to have a job will wind up working for a lot less, which means that those who will still be working and who own homes with mortgages will be at risk for losing their homes, especially if their loans are with scumbag banks like Chase.

The problem is that once deflation starts, about the only way to break the spiral is by massive government spending on a near WW2 level of spending. That won't happen if the party of Hoover has anything to say about it, for the destruction of the working and middle classes is a long-cherished dream of them. Their useful idiots, the Teabaggers, will be only too happy to be complicit until everything comes crashing down around their ears.

And then, they will look for someone to blame. That's when a real demagogue can arise and if that happens, then that will be all for our democracy as we have known it.