Wednesday, April 22, 2009

deflation and what that means to me

I was reading the newspaper yesterday and read a small article on deflation in Spain. I knew what inflation was but quite honestly didn't know about deflation. For any of you who don't know, it is when prices drop rather than rise like inflation. Doesn't sound bad at first, paying less sounds good right about now. However, it is bad, it is downright terrible. The obvious downside is that if prices drop, businesses make less, pay less, hence workers make less, buy less and everything starts to circle the drain.  I don't know about the rest of you, but I have been seeing deflation creeping in over the last 6 months, I just didn't know what it was called. 

For me deflation is the project I lost because someone underbid me. It is the customer who asked for a discount, who negotiated a slightly lower rate due to the recession. Yes it is the projects I get calls for that pay less than they did last year for the same amount of work. Obviously deflation is bad news. And deflation is here in all of its glory. For how long no one knows. The part that really concerns me is how do we get our fees back when things start to turn around?  

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