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The implicit price deflator of the non-financial business sector has been -0.6 percent in the year to the end of the second quarter of 2002. Germany faces the same predicament. As oil prices surge, their inflationary shock will give way to a deflationary and recessionary aftershock. Depending on one's point of view, this is a self-reinforcing virtuous or vicious cycle.

However, when deferred demand slackens, we shall once again face the deflationary dangers which beset this and other countries during the 1930's. Prosperity can be assured only by a high level of demand supported by high current income; it cannot be sustained by deferred needs and use of accumulated savings.

However, when deferred demand slackens, we shall once again face the deflationary dangers which beset this and other countries during the 1930's. Prosperity can be assured only by a high level of demand supported by high current income; it cannot be sustained by deferred needs and use of accumulated savings.

Inflation acts as a tax and is fiscally corrective but without the recessionary and deflationary effects of a "real" tax. The outcomes of inflation, ironically, resemble the economic recipe of the "Washington consensus" propagated by the likes of the rabidly anti-inflationary IMF. As a long term policy, inflation is unsustainable and would lead to cataclysmic effects.

I know they are as wholehearted in their patriotism as any other group. They have suffered from the constant fluctuations of farm prices occasionally too high, more often too low. Nobody knows better than farmers the disastrous effects of wartime inflationary booms, and postwar deflationary panics. So I have also suggested today that the Congress make our agricultural economy more stable.

Retail sales, though way below expectations, were still up 2.7 percent last year. But the country is in the throes of a deflationary cycle. The producer price index was down 0.8 percent last year. Year on year, it decreased by 0.4 percent in January. Export prices are down 6.7 percent, though import prices fell by even more thus improving the country's terms of trade.

Wages the price of labor are left out. The price of money interest rates is excluded. Even if these were to be included, the way inflation is defined and measured today, they would have been grossly misrepresented. Consider a deflationary environment in which stagnant wages and zero interest rates can still have a negative or positive inflationary effect.

This possibility of a deflationary spiral in the future will exist unless we now plan and adopt an effective full employment program. During the war, production for civilian use was limited by war needs and available manpower. Economic stabilization required measures, to spread limited supplies equitably by rationing, price controls, increased taxes, savings bond campaigns, and credit controls.

Consumers learn to expect lower prices i.e., inflationary expectations fall and, with them, inflation itself. The intervention of central banks only hastened the process and now it threatens to render benign structural disinflation malignantly deflationary. Should the USA reflate its way out of either an impending double dip recession or deflationary anodyne growth?

This possibility of a deflationary spiral in the future will exist unless we now plan and adopt an effective full employment program. During the war, production for civilian use was limited by war needs and available manpower. Economic stabilization required measures, to spread limited supplies equitably by rationing, price controls, increased taxes, savings bond campaigns, and credit controls.