Avoiding The Monetary Cliff (Deflation)
Posted: Wed Oct 30, 2013 9:48 pm
Jim Rickards posted a link from his favorite economist, John Makin, where Makin makes the case that the overriding threat for the U.S. economy is deflation, not inflation. He even states that an increase in QE purchases might be necessary. Quite an eye opener!
Makin states:
"Once an economy slips into deflation, the risk of falling into a self-reinforcing deflationary spiral rises. And as deflation increases, investment, spending, lending, and employment growth suffer. Because the United States is the largest economy in the world, US deflation would be exported to the rest of the world. Federal Reserve Chairman Ben Bernanke and his recently nominated successor Janet Yellen can prevent the United States from falling off the monetary cliff by making deflation avoidance a more clearly stated Fed objective and by setting a new range for inflation that has a hard lower bound."
http://www.aei.org/outlook/economics/mo ... ary-cliff/
Makin states:
"Once an economy slips into deflation, the risk of falling into a self-reinforcing deflationary spiral rises. And as deflation increases, investment, spending, lending, and employment growth suffer. Because the United States is the largest economy in the world, US deflation would be exported to the rest of the world. Federal Reserve Chairman Ben Bernanke and his recently nominated successor Janet Yellen can prevent the United States from falling off the monetary cliff by making deflation avoidance a more clearly stated Fed objective and by setting a new range for inflation that has a hard lower bound."
http://www.aei.org/outlook/economics/mo ... ary-cliff/
