Inflation seems real because the federal government reports on it frequently. The calculation of inflation is periodically adjusted to “improve accuracy” or, for the conspiracy theorists, to dampen negative political impact.

 

The concept of deflation is so far from our current culture’s mentality that it seems surreal. Yet, consumers are benefitting from it regularly without realizing what is happening or its long-term implications.

 

Consider what you paid for your computer, TV or cell phone just a few years ago. A decade back in time pricing these items would be like a time warp. Imagine what savings you could have if everyday items you purchase, like milk, soda or toothpaste, had prices posted to the web hourly for your neighborhood’s local merchants.

 

Imagine no more. In Japan, cell phones have apps that do just that. (Undoubtedly, coming soon to a phone you use). Using social networks, Japanese housewives, a pricing army of 25,000+, keep updating prices through a mobile website. Store loyalty has succumbed to spending less money on whatever, whenever and wherever possible.

 

Last week, the Prime Minister announced that deflation is the country’s largest problem. Second is a financial crisis. Two decades of government stimuli have not stopped deflation.

 

The demographic cards have been dealt. There is no population segment that will be large enough to spend the economy back to pre-1989 prosperity.

 

Fortunately, for the U.S., we have a new baby boom that is larger than the post-war Boomers. In another decade, their family spending needs will resurrect our economy. In the meantime, deflation will win the pricing battle.