Friday, August 15, 2008

End of Deflation Exported

Click on the link above to access Alan Kohler's article "Deflation no longer duty free".

I find it quite amazing just how clear this all seems to the commentators after the event.

Yes, mobilisation of labour in China and India kept inflation subdued despite excessive monetary expansion. It suppressed the price of consumer goods whilst property and equity markets skyrocketed. For an extended period we have had true inflation, being expansion in the money supply, running much higher than headline inflation figures. Probabably around 6-8% most of his decade.

The interesting part now is really what sort of recession we are going to have...inflationary or deflationary.

The jury is out on this one.

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