Economy: Forget Inflation, Deflation Is a Bigger Danger - Mortimer B. Zuckerman

My commentary:

        “Until employment grows enough to push wages, and income and production levels increase to more normal levels, the most pressing worry will be deflation, not inflation.” The fed has tried to force feed the economy with zero interest loans to banks. Banks however are not lending because businesses are not borrowing. Unemployment and paying down debt instead of making retail purchases means too little money chasing too many products for sale according to Zuckerman. He says that this will cause prices to fall.

        The worst decline in retail spending in decades is causing retailers to offer their inventory at low prices which will eventually deplete the supply of goods, before new production or imports can take their place. Production of domestic goods is at a 50 year low. Companies are being forced to cut labor and advertising costs to increase their profit margin. This is not a formula for continued success for domestic producers.

        The question is where will new jobs be created? Green jobs have not materialized while durable goods manufacturing is all but dead in America.  Waiting for new jobs in this economy is like waiting to catch a fish in a bathtub. For years the EPA, high taxes, and labor unions have been slowly killing jobs in domestic production. No one should be surprised that there is no room for improvement, and no one should believe that this economy was born during the eight years of the last Bush Administration. It was the liberals like Al Gore who championed the environment over production, and there is no let up on the horizon given that the mass media is totally behind the liberal agenda.

        Zukerman talks about a gap of 10 percent between low demand and high supply. It seems he is referring only to domestic production. What happens when we take into consideration the vast production supply from China and the supply of dollars coming from China once the Chinese cash in their U.S. Treasury bonds? What does that do to the supply and demand curve and the gap between demand and production?

        How many dollars will be added to the economy if the national debt were to be paid today? “This year, just through October, it has added a stunning $1.2 trillion to its obligations, or $4 billion a day.” That is just the tip of the iceberg. The national debt is currently at 12 trillion dollars. The gross national product is also about 12 trillion and falling, while the national debt is projected to double.