The Specter of Deflation
WASHINGTON — Until recently, the idea that deflation — the decline of most prices — was possible, let alone a potential economic danger, seemed outlandish. If anything, inflation was the threat. Led by rising oil and food prices, it was increasing in most countries. But in the past two months, deflation has suddenly become conceivable and, though still a long shot, it’s much more menacing than most people realize. The most urgent economic task for Barack Obama and other world leaders is to prevent the long shot from happening. A mild deflation — like a mild inflation — would be barely noticeable, and even pleasurable. Who doesn’t like lower prices? But beyond a few percentage points, deflation can create economic havoc by forcing debtors to repay loans in more expensive money and causing consumers to postpone purchases. In the Great Depression, deflation reigned. Consumer prices fell about a quarter from 1929 to 1933. Spending collapsed. Supply swamped demand, driving prices down. By 1933, manufacturing output had dropped 39 percent and joblessness had reached 25 percent.

Dissecting the Changing Electorate
Marjorie Connelly, New York Times