GOOD, BAD AND UGLY.

The newest U.S. economic problem is the loss of white-collar jobs to Asia. On May 6, the Federal Reserve announced it was concerned about excessive disinflation. Disinflation--a sustained slide in prices for goods and services that promotes rising asset prices--has occurred near-continuously since 1981. Deflation--a sustained collapse in prices for goods, services, stocks and real estate--has not occurred since the Depression (except in Japan). The economic downturn that began when Nasdaq collapsed still bedevils the industrial world. Massive over-investment in Internet gear not only brought down the technology industry, destroying millions of jobs, but devastated the usually reliable telephone industry. When educated English-speakers in Asia can compete for good jobs in the industrial world without leaving home, then people who earn one-tenth or one-fifth what North Americans earn become formidable competitors. In earlier economic cycles it was manufacturing jobs that migrated to low-wage economies. Demographic deflation now spreads across the industrial world. The most powerful driver of our new kind of deflation isn't tight money or China or technology, but birth control. Japan avoided outright depression because of its permanent trade surplus -- which means it imports jobs. The U.S. runs a permanent trade deficit that now exceeds five per cent of GDP, so it has been exporting millions of jobs. Will the central bankers in the U.S. and Europe avert deflation and restore strong economic growth?