Wednesday 13 December 2017

Economists may worry about deflation but I'm not so sure

'There are other dangers from falling prices'
'There are other dangers from falling prices'
Brendan Keenan

Brendan Keenan

ONE has tried hard, very hard, to worry about deflation, but it isn't easy. For a start, one is not a debtor. For governments, or those on tracker mortgages, the low interest rates that accompany near-zero inflation help offset the slow fall in the real value of their debt. But inflation would be quicker.

But even for savers, the "financial repression", from ultra-low interest rates seems not as alarming as the very rapid reductions in the real value of savings produced by high inflation. Especially if that has been the perceived danger for most of one's life.

It is not just debt, though. There are other dangers from falling prices, or even disinflation – where prices are rising hardly at all.

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