Monetary policy is used for fighting inflation and is useless for fighting deflation. Deflation is fought via government fiscal policy. The true danger we face is by increasing the deficit too far and losing confidence in the dollar. While deficits must be incurred to fight deflation, there will come a time when taxes must be raised. I doubt we will have the stomach for tax hikes until the supply siders are laid to rest.

Not so quick Joe. True they covered up inflation, but the wealthier classes can easily fight inflation so inflation breaks the back of the middle and lower classes. On the other hand deflation hurts the wealthier much more and they also count their money often. There's no fooling them.

My guess is this "food fight" is Paulson trying to get Congress to release the other 350 billion before Obama takes over. The first 350 billion+ is gone to the big guys who made this mess and this is about who will get the rest.

"predicted "further sharp declines" for inflation in November. "

What's the problem? Can't bring yourself to say de de de deflation.

These numbers are not too surprising as yet. I am looking for panic or lack of panic selling of inventories by producers. We are already seeing some dumping by retailers and some producers but will it carry over to most producers.

No doubt we are in a pickle. Economies must spend now to prevent an deflation spiraldown, but must know when to stop inflating to avoid destroying their currency. The winners, I think, are those countries that actually get something for the money spent while inflating. On that note the US is way behind the 8 ball as the trillions spent so far since the turn down started in 2000 is mostly down the "rat hole" and continues as we speak.