Dimitris

Deflation on the Ski Slopes?

Kunst,

The problem this time is not liquidity, but instead it's insolvency. Regardless of how much money the Fed pumps, the banks are not lending to someone with shaky credit in this economy. Therefore, by the time the velocity of money reaches the market, disinflation will continue in consumer prices. The fear is that asset inflation (housing) will spread to other sectors, mainly the job sector. So, that is why unemployment is key as you say.