U.S. wholesale prices swelled last month by 0.9% but the core inflation budged only 0.2% - reasons why deflation is here
Special Correspondent
Jan. 17, 2007

Core producer prices, which exclude food and energy prices, increased 0.2% in December after climbing 1.3% the previous month. The inflation number associated with the report is a historical data caused by relatively higher oil prices. The price of oil since then has collapsed 13%.

If you look at the core inflation without food and energy, you find a whopping 90% decline from last month. The bottom line is that if you just look at the core inflation and add to that the current energy price, you get a drop of 1.1%. That is deflationary. The economy faces sector deflation. There are spots of inflation where people have to spend to live – like healthcare, education, and so on. But otherwise the companies face lack of pricing power in spite of higher input prices related to cost of raw material. The companies continue to show higher profit by manipulating numbers and outsourcing from cheap labor countries.

Deflation is real and it is here. The stagflation is changing to deflation. Fed Reserve never accepted the fact the economy is faced with stagflation. Now they will refuse to accept that the economy is goin into deflation.

The deflation scenario is clear from the inverted yield curve. The long term interest rate is lower than short term.

U.S. wholesale prices swelled last month by 0.9% but the core inflation budged only 0.2% - reasons why deflation is here
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