OH, GOODY: Amid Pressing Problems, Threat of Deflation Looms.

The risk of deflation — generally falling prices across the economy, beyond volatile energy and food costs — remains slim. But the financial shock and a faltering economy can set the stage for a deflationary environment.

Federal Reserve officials view broad-based deflation as unlikely but possible.

Numbers don’t show it yet, and I hope they don’t. Dealing with inflation is painful, but dealing with deflation is much, much more difficult. Meanwhile, here’s some modest good news:

But for the week, the Dow rose 4.8%, its first such gain since the meltdown of Lehman Brothers Holdings set off a global financial crisis in mid-September. The gain was also the Dow’s biggest weekly rise in percentage terms since March 2003.

Stay tuned. If Obama is elected, I predict nothing but peace, prosperity, and cheerful camaraderie as far as the eye can see.