There have been few times in U.S. history when there was so much uncertainty regarding the future of prices. Some economists believe the price level will decline, due to the slow economy, and the U.S. could enter a deflationary period. Others point to how the Federal Reserve has drastically increased the money supply, and may continue to do so. They think inflation is inevitable. An informative article by Scott Patterson in the Wall Street Journal addresses this uncertainty and provides some tips. Here its explanation of the problem:
Either scenario could be damaging to businesses. During high inflation, rising costs eat into the bottom line, and companies may not be able to boost prices to fully compensate. The deflationary worry is that consumers, expecting prices to fall, will cut back on purchases. That can lead to more layoffs, and less demand, and trigger a crippling spiral of sliding prices.
Read the full story at the Wall Street Journal.
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