Vincent Farnsworth 6:31 p.m., Dec. 4
Deflation Here? Consumer Prices Drop. So Do Stocks, Residential Real Estate, Commodities, and Consumer, Investor Confidence
Signs are mounting that the efforts of the government and central bank to fight deflation may be contributing to it by destroying consumer and investor confidence. All the bailout talk that escalated in earnest in September with the passage of the $700 billion Wall St. welfare package may have contributed to the fear gripping markets and consumers. Today (Nov.19) stocks plunged 5 to 6.5 percent. GM and Ford, testifying in Congress on their desire for handouts, dropped 9.7 and 25 percent, respectively. Insurers Lincoln National and Hartford Financial, both seeking handouts, plunged 34.5 percent and 28.6 percent, respectively. The consumer price index was down 1 percent in October. The Federal Reserve said that the economy will contract in the second half of this year and the first half of next year. That would make it a one-year recession. Given the Fed's record for Rebecca of Sunnybrook Farms forecasts, you can almost double the prediction to a two-year recession. Prices of stocks, real estate, and commodities are all declining at once -- an unusual pattern except in a generalized price decline such as in the 1930s. Consumer confidence indexes plummeted in September as the government talked of bailouts. The stock market's steep declines escalated around that time. There is an old saying that once a company says it is thinking about bankruptcy, it is in bankruptcy. Maybe the Treasury's Hank Paulson and the Fed's Ben Bernanke should check that old aphorism.