UNCHARTED TERRITORY
Fed shifts to rooting for a little inflation

"Deflation is like quicksand. It is very difficult to get out of. So the Fed doesn't want that to happen," said Sung Won Sohn, chief economist at Wells Fargo.

With deflation, prices fall and consumers stop spending because they think better deals are on the way. That hurts businesses, which are forced to cut prices to woo shoppers. Earnings then tumble. A vicious cycle ensues.

The last time Americans saw deflation was during the Great Depression. Since then, Fed policy-makers have largely focused on fighting inflation.

Of course, the Great Depression was preceded by an economic bubble spurred on by the period of unregulated business, banking, and finance known as the Roaring Twenties. Coincidence: our current recession was preceded by a period of increasing deregulation of business and finance that seemed to heavily contribute to the now burst economic bubble during the Roaring Nineties.

Perhaps this is only a coincidence, but, personally, I think not. Looming deflation is not good news, and that's a major understatement. We're in a fine mess and the blame must fall squarely on the shoulders of the free market fundamentalist cheerleaders at newspapers, in Congress, and in economics departments at colleges and universities throughout the land. Wealth cannot be trusted to police itself--left to its own devices, it will always turn cannibalistic and eat the nation.

I say eat the rich.

Click here to learn more about potential deflation.

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