That's why the U.S. dollar keeps rising in relation to other currencies and our trade deficit is sky-rocketing. The world is hording dollars. Reducing capacity is much more painful as the Asian situation now illustrates. The whole world has spent a generation fighting inflation and has yet to recognize that we are in the midst of the exact opposite problem. The last bad bout of deflation in this country was during the Great Depression.
Deflation makes companies lower the price of their goods and gouges profit margins.
It could be the end of the great bull market of the 1990's. Even a tight labor market and the increased wages of workers hasn't reversed the deflationary trend. None of the above problems would be so bad if stock markets weren't based entirely on human frailties like greed, fear and blind faith. Today the markets are way above their historic trend lines. The Dow is 2,000 points up from late 1996, and 4,000 up from 1995.