The Ascension of Bernanke Into the Clouds by Frank Shostak

What are the other problems with Bernanke's thinking? The man has a pathological fear of deflation, which he defines as fall in the price level. A fall in prices is regarded as dreadful news since it causes consumers to postpone their buying of goods and services. If people hold on to their money during deflation, he believes, its purchasing power will increase and this will enable them to buy more goods some time in the future. It is for this reason, so it is held, that people choose to spend less once prices are falling. Since consumer spending is almost 70% of GDP this means a cut in consumer spending would slow down the economy.

posted by SARTRE @ 10/27/2005 07:50:00 AM