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#Written by David Tam, 1999.           #       
#davidkftam@netscape.net Copyright 1999#  
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From tamda@ecf.toronto.edu Mon Jul 12 18:28:09 1999
Date: Tue, 23 Feb 1999 16:40:31 -0500 (EST)
From: David Kar Fai Tam <tamda@ecf.toronto.edu>
To: APS 424S <aps424@chem-eng.toronto.edu>
Subject: #14-02/24/99-"Inflation dips to lowest level since '62"


The Globe and Mail, Friday, February 22, 1999. B6.

	This article reports Canada's inflation rate is at its
lowest level since 1962. Despite more expensive imports, due to
the weak Canadian dollar, we still managed to reach this very low
rate.  Analysts are worried that this will eventually turn into
deflation, where the price of goods and services decreases, and
trigger economic problems.

	To combat this problem, analysts are suggesting that the
federal government cut interest rates. This has the effect of
simulating the domestic economy, increasing demand for goods and
services, there by increasing their costs as well. Low interest
rates would mean it would be cheaper for individuals and
corporations to borrow money, and it would also discourage
individuals from simply keeping money in their savings accounts.

	Deflation is considered bad because it encourages
corporations and individuals from spending immediately and
encourage them to save and wait until prices drop even further.
This would lead to a vicious cycle causing a halt to the domestic
economy. As one analyst stated in the article, "We delay
purchases because we think the price of the good will be cheaper
tomorrow and that delays consumption and that therefore delays
the production of goods and the whole thing just spirals into no
activity." Deflation was a key characteristic of the 1930s
Depression.

	It is quite interesting that there seems to be many
conflicting economic forecasts by the media as a whole. Some
articles cause you to believe the economy is very strong and will
continue to perform at the current level in the future. There are
other articles that cause you to believe that the future outlook
is mediocre. Yet, there are others that are warning us that the
sky is falling. The economic problems in all the other parts of
the world are going to have very negative impacts on Canada's
future.  With the U.S. economy's spectacular performance some
believe we will not be affected greatly by the world's economic
problems. They believe that our proximity to the U.S. will cause
our economic performance to mirror that of the U.S.

	With all of these different views, I myself have not been
able to form a solid opinion as to the state of our economy and
where we are headed in the future. Being uncertain, my current
philosophy is to operate under extremely conservative views.
Don't count on a rosy future even if many are predicting this. Be
ready for the unexpected as the economic outlook will change
almost as quickly as internet stock prices do.