Back to Deflation

Well, that's what I get for posting my concerns regarding the economy a couple of weeks back before really letting the data accumulate adequately. Basically, starting the day after that post, there's been nothing but good economic news (for the United States). First, that ever so important commodity, oil, is dropping significantly in price, which should put a damper on inflationary forces:

Oil prices continued recent heavy losses Thursday as dealers focused on a glut of U.S. stockpiles, which have grown to the highest in six years. Weakness was curtailed, however, after OPEC's president said the cartel could rein in output if inventories rose too fast and after an oil workers' strike forced shut several refineries in France.

U.S. light crude for June delivery ended down 33 cents to $46.92 a barrel on the New York Mercantile Exchange, after falling as low as $46.80, its lowest since mid February. U.S. crude is now nearly 20 percent below April's all-time high of $58.28 a barrel as a tide of imports fills storage tanks in the world's largest energy consumer to levels not seen since 1999.

Another sign that inflationary pressures have dissipated is that long term interest rates are gently drifting lower:

Mortgage rates fell last week, reaching a low not seen since February, despite incremental interest rate hikes by the Federal Reserve.

The average rate on 30-year fixed-rate mortgages fell to 5.71 percent this week, with an average 0.7 point payable up front, from 5.77 percent last week, the government-chartered mortgage company Freddie Mac said.
Last year at this time, the rate on the 30-year fixed-rate loan stood at 6.30 percent.

I'd say Greenspan has done a more than adequate job controlling inflation. It may be time to start worrying about deflation again.