News

Facing the Ogre of Deflation

A March 19 Bloomberg article explains why deflation is a far bigger economic foe than inflation.

The ogre stalking the globe's weak economies isn't the one people have learned to fear. The monster isn't inflation but its opposite: falling prices. Its name is deflation and it appears friendly. Why be afraid when the cash in people's wallets buys more fuel and televisions, not less? Because when deflation grabs hold, companies and consumers stop spending. It strangles borrowers because their debts get harder to repay -- a menace for countries struggling to exit the worst recession in a generation. In this fairy tale, inflation comes dressed in shining armor as policymakers debate how to create just enough of it to keep deflation at bay.

Almost six years since the 2008 financial crisis turned the global economy upside-down, deflation threatens to drag out the turmoil... "If inflation is the genie," International Monetary Fund Managing Director Christine Lagarde warned in January, "then deflation is the ogre that must be fought decisively."

Read the entire article by clicking the link below:

http://www.bloomberg.com/quicktake/deflation/