HOW CAN PRICES FALL?: Thursday's Rally -- What's Really Changed? - Up and Down Wall Street Daily - R. Forsyth - Barrons.com
Let's see?
The government want to apply a Keynesian approach to maintaining aggregate demand.
OK, demand stays level.
But, government decides labor costs have to rise because more costs have to be added to labor to pay for healthcare for non-workers.
So, the labor component of production increases (as RF says, maybe less labor - i.e. fewer jobs).
But demand stays constant (Keynesian government consumption supports - transfer payments, unemployment insurance extensions, social benefits, support for Medicare, support for local and state government employment, etc.).
Raw materials prices go up.
The constraints on supply are HIGHER LABOR COSTS, HIGHER RAW MATERIAL COSTS plus, the favorite of liberals, higher taxes. So the COST OF CAPITAL goes up.
Now, it's hard to see how the price of goods can go down?
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