Atlas Shrugged: The Mocking

Tuesday, December 16, 2008

McArdle Says: No Deflation

Which means that there is and will be deflation. It's the Inverse Meganosity Principle. Take what McArdle says and go with the opposite. Otherwise you'll believe that the stock market, sub-prime loans, CDOs and all those new-fangled securities are the way to success.

Talking heads on CNN are solemnly discussing the possibility of deflation. This remains, however, just a possibility. The fall in the CPI was driven almost entirely by energy prices, without which the price index was flat.

This is still good news for households that will be paying less for their energy, at least until OPEC gets its act together. But it does not necessarily herald a general fall in the price level, which is what creates the deflationary traps economists worry about.

Oh, god, sometimes she's too much. There's a fine line between being controversial and raising a stink because you're always wrong. Everyone who has been right so far--which most certainly does not include our Megan--says deflation is becoming a serious problem. Here's Krugman, Yves Smith, and Fortune on deflation.


Anonymous said...

Nassim Taleb is also in the deflation camp.


Susan of Texas said...

Great link, thanks.

Anonymous said...

The fall in the CPI was driven almost entirely by energy prices

The price of which tends to underpin a lot of OTHER prices, Megan Dearest. Not just because of things like the cost of shipping, but the manufacture of countless petroleum-based products. And then those price changes affect other, less directly related prices, which affect the prices of items and services dependent on THEM, and so on and so forth, down we go.

Does this "economist" (Megan does claim to be one, right?) not understand that when so much of the economy depends on that single commodity, changes in the price of that commodity will RIPPLE into everything downstream?

She must at least understand the simple laws of cause and effect. Surely....!

And she doesn't even consider the structural fact that employment is dropping like a rock. Demand for goods and services is drying up. Nobody is going to be able to get their old prices for any damn thing. And, oh, did she happen to notice the crash in construction? Hello? Megan? Anybody home?

Honestly, my boggle meter pegs every other day.

Susan of Texas said...

It has to be deliberate. Didn't she notice when the price of everthing from corn to eggs blew sky high?

Anonymous said...

Didn't she notice when the price of everthing from corn to eggs blew sky high?

Of course she didn't. I tell you, that woman HAS to be insulated from the realities of things like mere grocery bills by Family Money.

It couldn't be clearer that she does. not. care. And if she doesn't care, it means she has too much money TO care.

Susan of Texas said...

You must be right.