MORE DEFLATION FEARS
Wholesale prices decline again

The back-to-back declines in wholesale prices come in the aftermath of recent warnings by Fed Chairman Alan Greenspan and his colleagues about the possibility of the country facing deflation.

Although Fed policy-makers say the chance of that happening is remote, the Fed still must be alert for deflation because of its potential to wreck the economy, they said. While the country experienced limited bouts of falling prices at the end of the 1940s and in the mid-1950s, its last serious case of deflation was during the Great Depression.

In a bad case of deflation, prices fall for goods, services, stocks and real estate. Businesses, watching incomes and profits shrivel, lay off workers and cut salaries of those who have jobs. Individuals and businesses find it harder to pay off debt. Bankruptcies rise.

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