From The Seattle PI
By John M. Berry

Given all the real problems facing the U.S. economy, dragging out the remote danger of deflation is foolish. It’s just short of fear-mongering.

Yes, this is the worst financial crisis since the Great Depression, when consumer prices fell by one-fourth. Yet the economy, weak as its current prospects may be, bears little resemblance to that of the early 1930s.

In his radio address on Saturday, President-elect Barack Obama promised a massive stimulus package of tax cuts and spending increases to stimulate growth. Monday, Democratic congressional leaders said a program worth several hundred billion dollars would be ready for passage on Inauguration Day, Jan. 20. That’s exactly what the economy needs at this point, and the promises ought to defuse the deflation scare.

Warnings about deflation increased after the Labor Department reported on Nov. 19 that consumer prices fell 1 percent in October. That was the largest monthly decline since seasonally adjusted figures began being published in 1947.

A close look shows the decline, while noteworthy, didn’t signal that deflation lurks around the corner. Core prices, which exclude food and energy, dipped only 0.1 percent.

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