By MARK DEVOLDER
Los Alamos

Recently, Americans did a good job of dealing with high inflation and a potential recession. However, many folks burned up their savings and / or resorted to increasing their credit card debt. Now, Americans are faced with a bigger problem – deflation.

Why would deflation be a problem? First, there is probably quite a bit of pent-up desire to spend after having been thrifty for so long. As gasoline, diesel fuel, food, and commercial item prices fall, there will be some additional money available for other uses by consumers. Second, Saudi Arabia and Russia are probably going to want the same level of income; therefore, they are going to crank up their output of crude oil.

China has experienced the results of inflation too. With Americans spending less, there have most likely been adverse effects on various sectors of the Chinese manufacturing economy. As Americans start spending more in the coming months, China will crank up production to meet demand. China will also start consuming more coal and crude oil. When this happens, the price of everything will begin to rise again.

As I understand it, 60% of Americans are living paycheck to paycheck. It would appear that a little bit of extra spending money would seem highly desirable at this time. However, there is that increase in future coal and crude oil prices to worry about some months down the line. And of course, tax season is coming.

Now that Americans have cut back on spending, it might be advisable to continue that practice until the economic future is a little more certain. Instead of rushing out to spend that additional income due to deflation, it might be a good idea to replenish savings accounts and pay off some accumulated credit card debt.

Moral: If something seems too good to be true, remain cautious.

Have a festive holiday season and plan carefully for that uncertain future.