Tuesday, April 21, 2009

Is it Deflation or Just Gas?

CNN.com reported yesterday that the consumer price index fell from March 2008 to March 2009, the first decrease since 1955. The website paints a rosy glow, though, stating that most of the decline has to do with the price of gas. In March 2008, the average price was about $3.20 per gallon, whereas in March 2009 the average price is around $2.00 per gallon. That's all well and good, but what does that say about our economy as a whole? If energy prices (gasoline) can fluctuate so wildly throughout the past year, with no real official reason (I speculate speculation), how stable is our economy in general? So the consumer price index can decline year-over-year, but that does not count as deflation? Something is horribly wrong here.

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