Chi Guy asked in Politics & GovernmentPolitics · 1 decade ago

Would a recession/depression drive down prices of goods and services which equates to a major correction?

..in othert words, would a car that costs 24K today sell for 18k 3 years from now if the economy tanks next year?

Also, would a recessiondepression drive down some wages that may be viewed as over-inflated for the task at hand?

Just wondering and truly do not know.

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  • 1 decade ago
    Favorite Answer

    NO

    Greed based economies like the US has will always favor the aristocrats.

    The only wages that will go down is in the working class.

  • 1 decade ago

    Temporarily yes. But when this happened during carter's Administration,interests went up .I do not remember items actually going down in price except temporarily. Now the over inflated wages in some jobs will have to go down if people want to keep their job,like the union pay in the Car manufacturing. Once the recession is over things will return to normal again.i have never seen things go down and stay down for a permanent time.I noticed when recession was in people lost their jobs and the prices in most thing stayed the same. Houses were lost ,but buying a house was hard as interest rates were up and there was few loans being made.

  • 1 decade ago

    Yes. In a recession or depression, the purchasing power of the people is reduced. If they have less purchasing power, they will either buy less, or prices will have to be reduced to enable them to buy what is ont the market.

    Merchants don't do this from the kindness of their heart, they reduce prices because things aren't selling.

    The wild card in this scenario is the continued inflation of our currency. As our politicians continue to print more frns, their purchasing power is diminished. When this happens at the same time as a sluggish economy, the result is stagflation: more money in circulation - but mostly in the hands of the favored elite.

    The solution: return to Constitutional government; a return to honest money, and government out of the economy.

  • 1 decade ago

    http://www.elliottwave.com/deflation/default.aspx

    Name of article

    "Why Deflationary crashes and Depressions go together"

    And lots more to get info.

    Deflation as a subsequent effect of credit expansion has been in correlation with depressions.

    This is also good as well.

    http://inflationdata.com/inflation/Deflation_Artic...

    __

    While I do agree with mel on some points, I have to disagree with the interest rates idea. The Carter administration.. just as Bush's or Clinton's... have no effect on interest rates. That is the Fed's job. Volcker, Fed Chairman at the time, saw stagflation (inflation + unemployment) and the only way he thought to fix it was increasing interest rates.. essentially CAUSING deflation in credit markets... not inflation.

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  • 1 decade ago

    I think some things will we are already seeing this with fuel... I don't know if cars will... as long as the unions have their stronghold there wages will not go down (at least not without a fight)...

    but I think as long as we use corn based ethynol in some of our fuels we won't see a lot of food prices go down... because even though were are in a recession era we also have a strong supply and demand stronghold... so as long as things like corn is in high demand I doubt we will see those food prices go down... at least by much anyway...

  • 1 decade ago

    No. A company still has the expense of labor and raw materials. If it costs the company $800 to build some product, they cannot sell the product for $500 and stay in business.

  • 1 decade ago

    Don't forget Wage deflation. Yes! It's already happening.

  • 1 decade ago

    I would believe so, prices and wages would drop !

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