Well, we are running the risk of deflation. To compound problems, two states just raised their minimum wage (I understand they have good intentions, but doing good always comes with consequences).

With everyone is watching the drop in prices. You may think that is good for the common good, but it has a rippling effect that may very well come back to haunt us. Many people even though prices are down, will wait even longer. When the prices drop, the manufacturers, retailers and the middlemen's income drops. When that occurs, costs need to be cut in other areas. Easy place to cut? Layoffs. Probably the only place most lean companies can make cuts. That means even less people buying. Which means even lower cuts.

Although raising minimum wage makes sense in terms of lower employees are more likely to spend it, this has a negative effect of the employers. Companies already on a thin line because of the current state of the economy are forced to make further cutbacks. Say a company has 50 employees at minimum wage and say the minimum wage is raise 20 cents. That's 20800 a year taken out of the business. In order to make up that cost, they will have to cut 1.25-1.50 employees. This ends up hurting a lot of employees to gain an extra 400 for the people who keep their jobs. It makes sense to raise the minimum wage when we are in an inflating economy, but why raise it during a recession?

 

Truthfully, has anyone seen a drop in the prices of goods? Energy maybe, but really we have just regressed back to the mean from a wacky spike. Homes may be less, but again regression to the mean. Milk, beef, steel, cement are still running high, maybe not 2007 high, but historically high. Have you looked at the prices of the new CBR's? they aint cheaper are they? With near zero % interest rates, we risk INFLATION not deflation.

Deflation will be hard to come by even with the dollar somewhat stronger. We are still a nation of debtors and importers, these two factors will never allow us to have more buying power. Our low interest rates will no attract foriegn investment in out debt therefore allowing our dollar to fall again. In addition, the world is full of consumers, we do not operate in a vacuum anymore, there is always another country that will buy the G I Joe with the Kung Foo grip.

When this economy picks up, an it will with inthe next 6 to 9 months, you will see inflation in everything but home prices. China will again suck up the worlds, cement, steel and diesel raising prices.

A deflationary spiral is not in the cards, we may see stagflation which is stagnant growth with rising inflation, but not a contraction with falling prices.

 

I left southern California for Austin Texas. Kept the same 6 figure salary and live like a freakin king. In Newport Beach house were approaching $1,000.00 a square foot. Absolute nonsense.

I don't see deflation ever being a reality, just corrections of some things back to appropriate inflation levels.

 

I wish they would start labeling minimum wage jobs as "starter jobs" which is what they are..... Too many people actually think they should be able to live on minimum wage. The truth is some employers need to pay less to even be in business and some people like kids or people in between real jobs can take less pay to get by for a short time. I hate it when people are silly enough to think that they should be paid great wages and benefits for working the typical min. wage job. In all reality, I don't think we even need a minimum...... If someone is willing to work for $4 an hour... let him, if not, he can find another job. Strive for something better people!!! Stop trying to survive on the minimum!!!!

 

Na...cause if too many people will work for $4 then you will be forced to work $4 cause else they will just find someone else to do the job. Honestly, if that were the case I could see myself being a thief/criminal cause there is no way in hell I'd be forced to work for slave labor.

 

there is a lot of truth to your statement, but you left out a very important part.. today's economy. Just take a walk around walmart, mcdonalds, or any big chain company.Before, you would see retired people and young college kids working for the summer, which is the way it should be.. Now, you see people in their late 20's early 30's even 40's working to make ends meet. When there arent any better jobs to be had, its hard to work to get there. Your seeing more and more people with bachelor degree's working for minumum wage because thats all thats out there. When you have 50k a year jobs leaving and being replaced with minumum wage jobs, theres not a lot of options.

Sometimes, the only option is to survive on minumum.

 

Or learn to catch rats.

 

Yep, you can eat and make jackets if you catch enuff of em.