The good news: prices are going down! The bad news: this will destroy the American economy (again). Unless...
Deflation! It's the buzzword of the economic summer. It means prices going down. Sounds awesome, right? Cheaper Cheetos? Wrong! In fact, deflation is a vicious spiral of doom that causes businesses to stop investing, destroys profits, and eventually collapses the entire economy down to every last person attempting to sell shiny apples for
a nickel three cents a penny.
"Pish posh!" you respond dismissively. "Everything is still too expensive! Who in the world is worried about this 'Deflation?'" Here's who: only the biggest investors in the whole world. Basically every huge investment fund is saying that deflation is a very real danger in the coming months and years. That would cause the stock market to fall, and government spending programs and action by the Fed would be necessary to counteract it. Which is all a way of saying, thank god for the Tea Party!
The rising clout of the Tea Party movement in the U.S. also has colored [hedge fund manager Alan Fournier's] view that elected officials won't have the ability to spend.
Mr. Fournier and some others say Tea Party adherents are appropriately worried about hefty government debts, but that without near-term spending and programs by elected officials, the economy could sink further.
Kill the deficit! Kill government spending programs! And in turn, kill our only ladder out of a dark, deflationary spiral!