Legal Commentary

AP Lives In A World Where Inflation Is A Threat

By Big Tent Democrat

In some other dimension:

Productivity was increasing at the end of last year at three times the expected pace while labor costs slowed significantly, underscoring that a deepening recession has taken away the threat of inflation. . . . Before the financial crisis hit with ferocity last fall, the Federal Reserve had begun to worry that rising inflation could become a problem threatening the economy. . . .

Buried in the AP story?

In another report, the government said that new jobless claims jumped far more than expected last week in an already dismal labor market and that there was no relief in sight for workers as mass layoffs persist.

Meanwhile, back on Planet Earth, Paul Krugman describes the deflationary threat:

Larry Summers has finally made the point I’ve been pushing for a while — that we’re at major risk of falling into a deflationary trap.

. . . Right now the CBO is saying that in the absence of a policy action the average output gap will average 6.8 percent over the next two years. Do the math: if anything like the historical relationship between output and inflation holds, we’re looking at major deflation. . .

We truly are flirting with disaster.

(Emphasis supplied.) And still the Beltway "bipartisan" BSers are fiddling.

Speaking for me only

Full post as published by TalkLeft on February 05, 2009 (boomark / email).