the social scientist.

This Recession Will Be Anything but Deep

I tend to agree with pretzel logic. I don't know of any significant occurrences of asset price deflation that didn't also have product price deflation succeed it.

As for Peng's idea that the financial losses are not as bad as they appear because the prices of the debt instruments may go up, I would point out that US financial firms are understating their losses, because as the price of their debt drops below par, they record that price drop as profit. The accounting principle is that they can buy the debt back cheaper than they sold it for.

There are also a lot of companies with defined benefit pension plans, who assume an annual profit on those plans, even in a year like this, which are in their earning statements. And finally, the companies that are losing money, get to record future tax credits as profit now, even though they have to make a profit to collect that tax savings. Remember GM? They finally had to write those imaginary profits off, because they weren't going to make a real profit in time to collect the tax credit.

My point - the reported losses are actually much bigger than reported.