Summary: Beware the Bottlenecks

The article "Beware the Bottlenecks" points out potential problems that isolated shortages could lead to. The author explains how it is surprising and worrisome that there are shortages in a variety of items in the current economy, ranging from cars to lobster bait. These shortages may be a sign that the current recession is not as bad as once believed. As the economy continues to grow and demand grows at the same time, these shortages could drive prices up and force the Fed to raise rates before the recovery even starts. Economists believe that shortages are short-term problems that won't end up hurting the economy too much; however the bigger problem is deflation. Deflation is an economic contraction that causes falling prices, unemployment and bankruptcies. The central bank must now focus not only on deflation, but also capacity bottlenecks that lead to inflation.