Give a Worker a Raise

How to Fight Deflation

By MIKE WHITNEY

"Deflation has spread to every sector of the economy; retail, travel, luxury items, autos, building supplies, home furnishings, electronics. No business has been spared. The C.P.I. inflation-gauge has slipped into negative territory and is now at -2.1 percent. Prices are headed down and spending is falling fast. Unemployment is soaring, wages are dropping, and the average work-week has been sliced to just 33 hrs.
...

Economist Irving Fisher tackled the problem of deflation 76 years ago in his masterpiece "Debt-Deflation Theory of the Great Depression". Fisher showed how over-indebtedness eventually triggers a chain of events beginning with debt liquidation and ending in distress selling, huge capital losses, and violent economic contraction. This is the challenge that Bernanke faces today.

...

Wall Street likes to stimulate demand through credit expansion and bubblenomics because they can skim fat bonuses on the front end and then bail out before stocks crash. But this perennial "boom and bust" cycle is a real loser for ordinary working class Americans, who merely want a little stability and a paycheck that keeps pace with inflation. The best way to avoid "demand shock"--which is at the heart of every recession--is through wage growth and full employment. It's that simple. When workers get better pay, they buy more more stuff and the economy thrives. Everybody wins!"