Deflation now UNANCHORED

From Bloomberg Report yday:

 

Which remind me of my favorite economist John Makin recent piece: Now is the time to preempt deflation: The same is true with deflation. It is necessary to be preemptive. Deflation is self-reinforcing, so if you wait to offset it until prices are actually falling, you risk losing control. The resulting pain can be more substantial than the physical pain that results from delaying ingestion of painkillers, since those will eventually quell discomfort, and deflation's appearance suggests that it will intensify before you can get control of it.

Deflation Warnings

It is not as if no one is noticing that deflation is creeping closer. The March 29 weekend Financial Times front-page, above-the-fold headline was, "Specter of eurozone deflation in view." Underscoring that fear, actual eurozone inflation for March was reported at a 0.5 percent year-over-year pace, down from a 0.7 percent pace in February. Core inflation in Europe is falling as well. Figure 1 shows measures of trend inflation since March 2011.

 

Steen Jakobsen note: Without saying I disagree with what's needed – monetary policy is totally impotent at zero bound, but…. SME/Lending through to velocity of money isn't – problem? It takes too long for quick-and-dirty results which both policy makers and politicans needs/wants.

 

 

 

 

 

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Steen Jakobsen  |  Chief Investment Officer

 

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