A 99-Cent Hamburger Isn't Deflation

What the economy needs is a little inflation. Instead, prices in the U.S. seem to be headed still lower over the next few quarters. And that raises the troubling potential of actual, Japanese-style deflation and economic stagnation.

That's my summary of the just-released minutes from the Sept. 24, 2002, meeting of the Federal Reserve's Federal Open Market Committee, the body that decides to raise or lower short-term interest rates. It cut rates 50 basis points one week ago.

But while the Federal Reserve is worried about the potential for deflation across the entire U.S. economy, many individual companies are already coping with actual deflation. Mix this "local" deflation with high levels of corporate debt and you create potential time bombs ready to blow up on investors. ...