The upside of the inflation numbers

In the post below I explain why I don't believe the government's numbers showing virtually no inflation for 2008.  However, there can be no denying that virtually every commodity (think oil, corn, wheat, steel, cement, etc.) is priced much lower than a year ago.  

Each time you go to the pump and pay $30 to fill your tank instead of $70 you are recieving the equivelant of a $40 tax cut.  Combine those savings with super low interest rates and we should see a boast in spending for everything else.  

But we probably won't.  1.  Consumers don't want to spend.  The notion of taking on debt to buy a new car isn't as appealing today as it was a year ago.  2.  Banks aren't lending.  The government is buying the banks "troubled assets" to help free up capital for the banks to lend to you and me.  The trouble is that the banks have gone very conservative.  You could get a great interest rate for a house!  (As long you have 25% down payment and a credit score over 750.)

*****

While the next post shows the downside of the government's numbers, the news of near zero inflation is good.  It gives the Fed the leeway to keep interest rates at zero to help get us out of this mess.  

For whatever it is worth, I'm more optimistic about the economy today than I was at Thanksgiving.  Then again, I'm not trying to get a job right now.