Estimating In Times of Deflation
The world is certainly in economic turmoil. As was pointed out to me last week by a CEO of a public company “When estimating future costs (then year dollars) it is important to understand the costs or cost savings of deflation” SEER allows for inflation or deflation and will issue deflation tables as (if) the forecasts come available. Consumer information is already available showing significant drops. Almost certainly, for 2009 inflation will not be the issue.
The Wall Street Journal announced today that:
“The Federal Reserve slashed its target interest rate to a range just above zero and promised to march ahead with unconventional measures to combat a recession that has deepened in the past few weeks.
The Fed said it would keep its target interest rate — an overnight bank lending rate called the federal funds rate –? between zero and a quarter percentage point after having moved it to 1% in October. The cut was more than many economists expected and marked the latest signal by the Fed and its chairman, Ben Bernanke, that the central bank was prepared to take aggressive steps to revive the economy and financial markets.
“The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability,” the Fed said in a statement. It added that it expected interest rates to remain low “for some time” and that it was studying other measures, such as purchasing U.S. Treasury securities, to lift the economy.
In the latest example of the deepening recession, the Commerce Department reported that new home building dropped 19% in November alone, to a seasonally adjusted annual rate of 625,000 units, a record monthly low.”
http://online.wsj.com/article/SB122945283457211111.html?mod=djemTAR
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This is nothing but an act of desperation, companies are trying lots of plan to cope up with the long-term recession that now is a very dangerous to most of them. This would be a trial and error process for them. Paradoxonomics are when good situations have bad results, such as if you avoid payday loans and end up getting a bounced check fee that ends up costing you more than you would have, had you just taken out the payday loan. Deflation is a similar thing â�� deflation within an economy is when the values of goods declines and the value of currency go up. However, there’s a big downside: with deflation comes higher unemployment, as employers are forced to let go of employees in order to cut down on operating costs because revenues have fallen. There is good news, however, and that is that the chances of the recession leading to deflation are minimal. But the Feds say things will get worse before they get better, so in the meantime, payday loans can help if you have a financial emergency.