Deflation American Style

May 13, 2003

By George Anderson

It has wreaked havoc on the Japanese economy and Alan Greenspan is determined not to let it happen here.

Last week the Fed chairman expressed concern about the possibility of an economy in deflation and his remarks have been a subject of debate among economists.

One camp agrees with Mr. Greenspan that deflation poses a real and present danger, or at the very least echoes the sentiments of Stephen Brobeck, executive director of the Consumer Federation of America. Mr. Brobeck told the Dallas Morning News, “If Alan Greenspan is worried about deflation, then I’m worried about deflation.”

Others argue the Mr. Greenspan is only seeing a portion of the picture. Some industries, particularly those in the service sector, are dealing with deflationary pressure while others, such as health care, continue to have steady price increases.

Moderator’s Comment: What impact will (is) an economy
in deflation have on the retail industry?

Right now retailers are in a tough spot. On one hand,
there is downward pressure on prices, while on the other are rising costs in
areas such as medical coverage for employees. [George
Anderson – Moderator

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