Here it comes Wave 2 of the Depression of 2010 caused by the stock market meltdown of 2008 and 2009.
AP Prices drop bigger-than-expected 1.7 percent Tuesday December 16, 9:34 am ET Prices plunge by record 1.7 percent in November, reflecting steep fall in energy costs
The Labor Department reported Tuesday that consumer prices fell 1.7 percent in November, surpassing the previous record decline of 1 percent set in October. The drop was the largest one-month decline dating to February 1947.
Deflation is considered a problem in a modern economy because of the potential of a deflationary spiral and its association with the Great Depression.
A deflationary spiral is a situation where decreases in price lead to lower production, which in turn leads to lower wages and demand, which leads to further decreases in price. Since reductions in general price level are called deflation, a deflationary spiral is when reductions in price lead to a vicious circle, where a problem exacerbates its own cause. The Great Depression was regarded as a deflationary spiral.
