Expert Commentary

League of (Deflating) Nations

It’s a club that more countries may soon be joining.

Major central banks around the globe might be engaged in a manic policy of monetary and public debt INflation, but DEflation is growing. This week, banks are reporting that corporate loan demand and personal credit card use are declining, and savings rates remain high. A declining social mood appears to be fueling private debt deflation. But it’s price deflation that is grabbing attention at the moment as more countries slide into declining consumer prices.

The chart below shows the list of countries around the world where consumer prices are declining on an annualized basis (price deflation). Germany, the Euro Area and Australia are three recent additions to the club. This list of 36 countries amounts to 19% of the 185 countries that monitors. Almost one fifth of the planet is experiencing declining consumer prices.

If we add in the countries where the annualized consumer price inflation is below 2% (considered by major central banks to be sub-optimal), the list of countries grows by 60 to 94. We can therefore state that 51% of the planet is experiencing sub-optimal – to the banks - consumer price changes.

We can refine the analysis to take out smaller nations and economies. Looking at the world’s major economies as defined by the G20 plus Netherlands, Spain, Switzerland and Singapore, we find that 29% of countries are experiencing price deflation and 66% have consumer price inflation running below 2%.

“Inflationists” might be screaming bloody murder about the amount of money printing going on, thinking that it leads to consumer price INflation, but the current evidence suggests that the world might be slipping into price DEflation instead.

League of Deflating Nations