smart spending

7 falling price tags

"If you look at the dollar, for a long time it was falling fairly rapidly, causing some of these prices to hold up a little," he says. "Now, the dollar is stabilizing in terms of its rate of decreasing. If the dollar goes up in value, it makes foreign-made goods cheaper; in other words, it lowers the price of foreign currency so importers can buy those items cheaper."

However, there's a downside to falling prices as well, Kelly says.

"When prices are falling, people will postpone buying," he says. "So you don't necessarily want deflation; you want disinflation.

"If you start having prices going down -- as in the housing market right now where housing prices are collapsing -- people say, 'Why should I buy a house now? It's obviously a buyer's market, I'll just wait a few more months and get something even better.'"

Such prudence will likely characterize consumer behavior as the economy slows, world markets struggle to stabilize and the effects of the Wall Street bailout on Main Street become clearer, Kelly says.

"You'll find that even more of those people who have money to spend are going to sit back and wait on the big-ticket items," he says. "Those are durable items that they've already got in hand but maybe don't have the latest high-def 52-inch version of. They're going to live with the one they have for six more months to get something better."

Jay MacDonald is a contributing editor based in Texas.

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