"...An acceleration in productivity relative to recent trends in real wage growth [little increase in wages with the high unemployment we are experiencing in late 2009] can have an important damping effect on inflation..."
The Wall Street Journal reported on September 21, 2009 the following statistics which corroborate Dr. Ben Bernanke and the Federal Reserve that inflation is not the concern today:
56% - hotel occupancy rate (the lowest since 1987)
14% - percentage of airplanes in storage because of, in part, weak demand
33% - percentage of rail cars in storage
66% - capacity utilization (a favorite % of mine which was 82% in 2003 and averages 75%)
18 - million vacant homes
15 - million unemployed
With this much "slack" in the economy, inflation is, it seems, going to have a difficult time rearing its ugly head. However, that said, we will once again - some day - be in a 2-3% inflationary environment and that may be the worst of all. Why? Because it is imperceptible.
Small rates of inflation degrade your purchasing power (reducing it in half) every 20 years or so. That is a powerful loss in your investments and why financial planning is important and, why, in retirement, distribution planning is essential.
A concern for spending too much in retirement also needs to be weighed against the other extreme of reducing your lifestyle beyond what is desired out of fear that you will not have enough. One of my 9 steps is knowing when "enough is enough". Have a financial plan.