MarketWatch Postscript: A Case for Deflation

자료: http://www.financiacapital.com/pdfs/Case_for_Deflation_6-2007.pdf

June 2007

It happened in Japan at the end of the twentieth century and around the world at the start of the last century. Early in the current decade economists debated whether it might strike again. Butnow few seem worried about deflation—the economic condition where prices consistently fall for both goods and assets. In writing the MarketWatch column in Semiconductor Magazine from

2001 to 2006, I alluded to some concerns about future deflation, but it was never possible to

address such a complex matter in a one-page column. So I want to take the opportunity now to

discuss this weighty subject, in a MarketWatch “postscript” of sorts.

Today, few are worried about deflation. But I believe that we should be much more concerned

than we presently are over the possibility of this past danger returning. Although I also think that this current economic expansion still has some ways to run. Nevertheless in this essay, I will

argue that policy makers are underestimating the consumer disinflationary forces in the world

today, a mistake that has led to the creation of dangerous asset bubbles. And once popped,

these bubbles seem likely to unleash global deflation.

There are three primary arguments in my deflation thesis:

• First, there are powerful disinflationary forces in the world today, which are causing the prices of goods and services to rise more slowly than in the past and are largely responsible for the low levels of consumer inflation we have enjoyed in recent years; 
• Second, reassured by a benign inflation environment, global central bankers have permitted excess liquidity to accumulate, which in turn has led to the creation of dangerous asset bubbles; 
• Finally, the inevitable collapse of these bubbles will eventually likely lead to a liquidity trap, the return of deflation and a negative global economic environment.

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