Falling prices don't result in depression

[Anorakphobia]

I attended a talk by Krugman last week.
Utter Rubbish and about as much charisma as Willie O' Dea.

[Scorpio]

I like this Friedman quote:

The record of 1879–1896 was very similar to the first stage of the alleged great depression from 1873 to 1879. Once again, we had a phenomenal expansion of American industry, production, and real output per head. Real reproducible, tangible wealth per capita rose at the decadal peak in American history in the 1880s, at 3.8 percent per annum. Real net national product rose at the rate of 3.7 percent per year from 1879 to 1897, while per-capita net national product increased by 1.5 percent per year.

Hmm, a bigger - and frankly better - picture is needed before one can conclude this was some golden era of economic growth. The "Real Great Depression" of the 1870s, 1880s and 1890s was first off more of a European phenomenon than a US one. The US did emerge the other side the world's strongest economy so their experience - while still chaotic and painful due to the full impact of revolutionary new transport and communication technologies - is not typical.

A quick look at the stats available for the time shows that for the UK, the US, France and Germany, over the entire generation from 1870 to 1895 there were only four years when all four economies grew. The UK had the most economic difficulties, shrinking in 11 years out of the 25, while the rest shrank in either 8 or 9 years. Average growth over the period was just 1% to 1.5%.

[Watcher1]

Well, whatever about yesteryear and other countries, what Ireland needs right now is continued deflation. This country is simply too expensive and deflation is exactly what we need right now. If that brings extra difficulties for this country now, then so be it. Better to get it all over with at once and not drag us on forever and a day. The government is making a good stab at that with the bank bailouts and NAMA. When we get to a position where we are competitive again, we can start to build from there. We just need to get there first and falling prices can only be a good thing in the Irish context of today.