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Deflation is the latest buzz-word
Watching the NBC Evening News with Tom Brokaw last night when this subject came up.
Apparently Alan Greenspan, in his latest meeting with the Congress, warned that it is a looming problem that can have a dire effect on the ecomony.
The news show then did an item about what it is and the impact it has.
They showed a shirt manufacturer in Florida and the management there noted that, as prices fall he has to cut production which means laying workers off. They went on to describe how this affects fabric manufacturers, truckers, etc all the way down to the cotton grower.
Mr. Brokaw did NOT relate the "antidote" so I guess that Mr. Greenspan hadn't offered one. Neither did Mr. Brokaw tell us (so I presume Mr. Greenspan didn't either) what was causing lower prices.
Now I think it is quite clear as to the cause of falling prices - "GLOBALIZATION"!
Shirts made in China or Bangladesh or Mexico or (name one) are much cheaper than U.S.-produced counterparts (let's disregard any quality issues because apparently we, as consumers, do and buy the cheaper ones regardless). To "compete" the Florida manufacturer has to lower prices, which likely starts by buying lower-quality raw materials but moves to driving workers harder and finally by laying workers off. Ultimately the company folds or it is moved off-shore.
I find it curious that Mr. Greenspan didn't offer a "solution" to the problem. Could he have been using "code" to tell IMPORTERS to RAISE THEIR PRICES in order to allow the U.S.-based manufacturers to remain "competitive"???? That's the best guess I can come up with.
I wonder why NO SOLUTION WAS OFFERED? I wonder why the solution of stopping the movement of manufacturing operations to off-shore locations wasn't suggested?
Does anyone reading know what the "solution" is for "deflation"? I'd sure like to learn it.
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