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Businessweek Archives

More Evidence Of Deflation

Readers Report


Your conclusion that "this hidden disinflation means that for the first time in recent memory, the U.S. may be close to zero inflation" ("Is inflation down for the count?," Economics, May 10) is a breath of fresh air. Below are some additional weaknesses in the position that inflation remains a problem.

For a long time, there has been a growth in the relative importance of the second, or underground, economy, where prices are lower, as producers and consumers divvy up the tax revenues that would otherwise have gone to the government.

Many services are increasingly subject to a weakness in prices that are not taken into account in the official price indexes. The growth of seniors' discounts, children eating and sleeping free, and lower prices on certain days of the week are all evidence of deflation.

This failure to recognize the possibility of deflation still shows up in Alan Greenspan's plans to lower the growth rate in the 1993 money supply and in the recent decision of the Treasury Dept. to stop a $50 billion increase in international liquidity through the creation of special drawing rights, as proposed by Michel Camdessus, managing director of the International Monetary Fund.

Lynn Turgeon

Professor Emeritus of Economics

Hofstra University

Hempstead, N.Y.

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