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- Nov 23, 2005
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Vanguard executives have just issued a statement saying that deflation is a real risk for the global economy, but didn't seem to be concerned with the U.S. economy. If global deflation should become a problem, how will this impact our investments?
Quote from CNBC:
"Executives at Vanguard Group, the No. 1 U.S. mutual fund company, said on Thursday deflation is a real risk for the global economy while downplaying inflation concerns for the United States.
"Most people say, 'Hey, deflation, falling prices, isn't that great!"' Vanguard Chief Investment Officer Tim Buckley said during a live webcast. But as he explained, falling prices are not something to be celebrated, especially in a developed economy that relies on consumption to fuel gross domestic product growth.
Read MoreRichard Parsons: Yes, bubbles could be forming
As consumers hold off buying things, GDP shrinks.
"Once you're in the cycle, it very difficult to get out," Vanguard Chairman William McNabb added.
McNabb said there are no data that support the presence of a lot of inflationary pressure, especially in the U.S. economy.
"When you look at what drives inflation, wages are the largest component. Most people focus on commodity prices, but wages actually are far more important," McNabb said. "And we have not seen much inflation there."
Quote from CNBC:
"Executives at Vanguard Group, the No. 1 U.S. mutual fund company, said on Thursday deflation is a real risk for the global economy while downplaying inflation concerns for the United States.
"Most people say, 'Hey, deflation, falling prices, isn't that great!"' Vanguard Chief Investment Officer Tim Buckley said during a live webcast. But as he explained, falling prices are not something to be celebrated, especially in a developed economy that relies on consumption to fuel gross domestic product growth.
Read MoreRichard Parsons: Yes, bubbles could be forming
As consumers hold off buying things, GDP shrinks.
"Once you're in the cycle, it very difficult to get out," Vanguard Chairman William McNabb added.
McNabb said there are no data that support the presence of a lot of inflationary pressure, especially in the U.S. economy.
"When you look at what drives inflation, wages are the largest component. Most people focus on commodity prices, but wages actually are far more important," McNabb said. "And we have not seen much inflation there."