Wednesday, December 17, 2008

Deflation: No Comprende

File this under economic things I apparently do not understand.

If you search the news for deflation, you'll find a lot of people worrying about it, but from what I can tell the drop in consumer prices is largely due to the collapse of the oil price bubble (which I know a little bit about because I got burned by it, or at least singed).

When gasoline shot up to more than $4 per gallon people went crazy, legislators accosted allegedly greedy oil executives in the national forum, folks accused gas station owners of gouging, consumer prices shot up due to rising production costs, nations rioted, governments became unstable, etc. And this wasn't very long ago, months.

I can only imagine how absurd it would be if the time span were even more compressed:

Monday: Gas $1.50 per gallon. Life is good.
Tuesday: Gas $4.00 per gallon. Inflation! Horrors! The sky is falling!
Wednesday: Gas back down to $1.50 per gallon. Deflation! Horrors! The sky is falling!

There's something I'm apparently not getting.


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