Perspective

JACKSON HOLE, Wyo. -- Say online retail sales totaled $2.4 billion in 1997. Say total retail sales totaled $2.566 trillion in 1997. Say total consumption totaled $5.494 trillion in 1997.

It would mean that, in 1997, online retail sales accounted for only 0.09% of total retail sales and just 0.04% of total consumption.

Say online retail sales totaled $7.8 billion in 1998. Say total retail sales totaled $2.696 trillion in 1998. Say total consumption totaled $5.806 trillion in 1998.

It would mean that, last year, online retail sales accounted for only 0.3% of total retail sales and just 0.1% of total consumption.

Imagine online retail sales total -- oh, gosh -- $108 billion five years from now. And -- nodding to exaggeration -- imagine that the levels of total retail sales and total consumption don't rise by one cent between now and then.

This would mean that, five years from now, online retail sales will account for only 4.0% of total retail sales and just 1.9% of total consumption.

And that's including one truly ludicrous assumption.

Now. Go ahead and jack up the $108 billion by 50% -- hell, double it. Go ahead and assume that every book on the planet -- as well as all the potential ones that all those monkeys at all those typewriters haven't quite banged out yet -- is sold online. Go ahead and assume that Americans suddenly find banner ads so enticing that they actually begin to click through and buy things they never knew they wanted or needed.

Then come back and join the rest of us.

Some folks have their faces pushed so far into this stuff that the real forest ceased to exist long ago. For them, the forest is now

Amazon.com

(AMZN) - Get Report

. This year is only 41 days old, but the following tidbit stands a strong chance of going down as the most eye-popping thing you will read all year: A number of readers wrote in yesterday to argue (very seriously) that the Dollar.com business model sails through the sanity test -- and that such a site is a great idea.

The Internet and its business implications are unambiguously remarkable. They will impact prices, productivity and growth at large. They are challenging us to think about economics in new ways.

But they will never, ever repeal the laws of supply and demand.

Dial M for ... Nevermind

Not too long ago, one could not read about the economy without coming across the prevailing view that deflation was rapping at our chamber door every bit as loudly as inflation was.

That was a reflection of the times. World

gross domestic product

was in the process of decelerating smartly -- to 1.8% in 1998 from 3.2% in 1997. Commodity prices were plunging outright; measures of consumer prices were posting year-on-year decreases in countries like China, Japan, Hong Kong, and Singapore. Toss in the fact that a large portion of the forecasting community invariably equates disinflation and deflation (on the price front) and slowdown and recession (on the growth front), and it's hardly surprising that some folks were forecasting a price problem the likes of which has not been seen in 70 years.

Some of them are still doing so. But they now find themselves firmly in the minority -- and more importantly, they're working against money.

Forecasters now expect (on average) consumer prices to rise two-point something this year in the wake of a 1.6% increase last year. Why? Still-tight labor markets, much less (or no) help from commodity prices and import prices, higher benefits costs and unit labor costs -- and money. Broad measures of the stuff were growing at 5% year-on-year rates just one year ago. Now they're growing at 11% rates.

Even forecasters who say publicly that money doesn't matter don't dismiss accelerations like that when they're alone. That's part of the reason why deflation forecasts have gotten rarer.

Side Dish

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