Friday, Aug 27, 2010
Deflation Delusion Continues as Economies Trend Towards High Inflation
The Market Oracle: Deflation Delusion Continues as Economies Trend Towards High Inflation
Delusional deflationist right from the Bank of England MPC, to the mainstream press for well over a year have pushed the mantra of ongoing debt deleveraging deflation everywhere, everywhere that is than appears in where it counts i.e. the actual INFLATION indices, where inflation is on the rise right across the world as illustrated in the UK by the persistent failure of the Bank of England to control UK inflation that remains above the banks CPI 3% upper limit. Even Greece that really is in an depression is experiencing inflation at above 3%, whilst the US CPI continues to inflate at a more modest 1.2%.
Posted by nadeem walayat @ 03:25 AM (365 views) Add Comment
1 Comment
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1. capitalist said...
It's not either/or. We are seeing asset price decreases, and simultaneous increases in the prices of liquid assets and consumer goods.
Debt is deflating and this is driving the prices of leveraged assets down. The value of liquid assets like Treasuries, and gold is going up. That is what you would expect in a deflationary environment.
But at the same time, as Market Oracle points out, worldwide consumption of resources is increasing at a faster pace than Western demand is slowing down, hence prices of consumer goods are going up. Where MO is wrong is in confusing the interplay of supply and demand, which is affecting consumer goods prices, with the question of inflation/deflation, which relates to the expansion or contraction of the money supply.