Tag Archives | deflation

Deflation far more likely than inflation

The last in the blog’s series on things that we think we know, but may not, looks at the prospects for inflation.  A new survey this week of the world’s wealthiest individuals summed up the consensus view: “If there are two factors that make the rich stand out, on this survey, it is their fear […]

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Japan’s ageing population challenges hopes of economic growth

The blog’s new series on the likely demographic impact on the world’s Top 5 economies today moves across NEA to focus on Japan – the world’s 3rd largest economy ($6tn).   As the chart shows: It has seen life expectancy (red column) increase by a third since 1950, to reach 82 years today At the same time, its […]

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Nobody realised the BabyBoom had happened till long after it finished

Milton Friedman received a Nobel Prize for economics in 1976, partly on the basis of his analysis that ‘inflation is everywhere and always a monetary phenomenon’.  It sounds an appealing insight, but of course it is wrong.  The reason is that it confuses cause and effect. The above chart presents a different view, highlighting the […]

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Deflation Jul13

“Deflation fears spark shock ECB rate cut”

The mention of deflation in the above front page headline of Friday’s Financial Times will not have surprised blog readers.  But it appears that not enough people in the European Central Bank read the blog, as the FT went on to report the ECB’s sense of ”shock” at the thought that deflation could now be just around the corner. This highlights the enormous […]

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Global interest rates surge as Newton’s 3rd Law continues to operate

Newton’s 3rd Law of Motion states, “To every action there is always an equal and opposite reaction“.  Thus the forces of two bodies on each other are always equal and are directed in opposite directions. Policymakers forgot this Law in their response to the 2008 financial Crisis.  Instead they believed that cutting short-term interest rates in the major economies to zero, […]

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Slowing demand and over-capacity create a Cycle of Deflation

“More buyers than sellers” was financier JP Morgan’s famous reply, when being asked why stock prices had risen.  The same, of course, is true of inflation.  During the 1970s, there were large numbers of Western BabyBoomers, and relatively few older people producing the goods that these young people wanted to consume.  So inflation rose sharply, to […]

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China heads into deflation as lending boom impact ends

Sometimes a picture really is worth 1000 words. This is certainly true with the above chart, showing China’s producer price index since 2008: • It highlights prices up 10% at the peak of the export boom, before the H2 2008 crash • Then it shows the short-lived recovery after China’s massive lending boom • Finally, […]

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Protectionism moves closer as countries try to devalue

A year ago, a panicked Federal Reserve introduced its QE2 programme. One of its key aims was to kick-start US growth via driving down the value of the US$ and boosting exports. Since then: • The US$ has fallen, and US exports have increased • But other major countries have become alarmed about the impact […]

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US core inflation at lowest-ever level

In one of its first posts, at the time of the ill-fated Access deal for Lyondell in July 2007, the blog highlighted the strange divergence that had developed between the front pages of the newspapers, and their business coverage: “If you read the financial pages of your newspaper, everything sounds rosy. But if you turn […]

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August highlights

Many readers have been taking a well-deserved break over the past few weeks. As usual, therefore, the blog is highlighting key posts during August, to help you catch up as you return to the office. August has been surprisingly busy: Force Majeure reports show worrying increase highlighted the worrying rise in force majeures, which may […]

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