It would seem to be this: When Paul Krugman speaks about economic policy and trends, pay attention.
The Federal Reserve finally may be taking the threat of a deflationary cycle seriously.
About fraking time, Krugman has been warning us that we are at risk for a "lost decade" of deflation for over two years.
Meanwhile, the Republicans are bleating about deficits and slashing government spending. Which didn't work the last time around and won't this time. But as the Republicans demonstrated two years ago, they are perfectly willing to wreck this nation in order to remain pure to their ideology,
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I disagree with Professor Krugman. We are already in deflation. GDP decline of -2.40% in 2009 combined with inflation rate of err, ZERO, between 2008 and 2010, means the money supply deflated by -2.40% in 2009. You do the math. Fewer goods, same prices, means there must be less money in the economy to go with the fewer goods in the economy.
The 2010 numbers are looking a little better than the dismal 2009 numbers, but the stimulus is petering out, and who knows what the final end-of-year numbers would look like? Given that we did experience genuine, actual, documented, bona-fide deflation of the circulating money supply during 2009, anybody just noticing *now* that we have deflation is dumber than a box of rocks and doesn't deserve to be in charge of a lemonade stand, much less a major U.S. financial institution. But that, sadly, is the story of recent U.S. history...
- Badtux the Number-crunching Penguin
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