At the same time, they strangle property markets, further encouraging a drop in prices. Both problems tend to make consumers feel poorer and merely contribute to a deflationary spiral. Don't forget the supply side. Especially in South Korea, easy credit often made it tempting for industrial companies to build production facilities even when they were less than certain there would be enough demand to justify them. Now, the same companies are faced with the imperative to produce and export as much as possible, which means sending products to healthy markets in the U.S. and Europe.
More goods chasing fewer customers equals falling prices.
In a speech a week later, U.S. Federal Reserve Board Chairman Alan Greenspan said that although he didn't see deflation as an immediate threat, he did think, because of worldwide overcapacity and currency devaluation in Asia, it was more worrisome than its opposite-evil twin, inflation. When Greenspan talks, world markets listen. The specter of global deflation became the hottest doomsday topic since, well, global warming. But don't cash in your hard currency for supplies of rice and canned vegetables just yet. I do believe we are in a global disinflation environment.