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South Korean Finance Minister: No Need to Fear Deflation

How many professional observers of the global financial scene expect deflation?

The answer is: relatively few.

As the July 2018 Elliott Wave Theorist noted:

Professional economists think the potential for deflation is essentially zero. As quoted in the first edition of Conquer the Crash, one economist told a national newspaper that deflation had a "1 in 10,000" chance of occurring. The Chairman of Carnegie Mellon's business school called the notion of deflation "utter nonsense." The publication of an economic think-tank insisted, "Anyone who asserts that deflation is imminent or already underway ignores the rationale for fiat currency--that is, to facilitate the manipulation of economic activity." A financial writer explained, "Deflation...is totally a function of the Federal Reserve's management of monetary policy. It has nothing to do with the business cycle, productivity, taxes, booms and busts or anything else." Concurring, an adviser wrote in a national magazine, "U.S. deflation would be simple to stop today. The Federal Reserve could just print more money, ending the price slide in its tracks." Yet another sneered, "Get real," and likened anyone concerned about deflation to "small children." A former government economist joked that deflation is "57th on my list of worries, right after the 56th--fear of being eaten by piranhas." On financial television, another analyst (who apparently defines deflation as falling prices) quipped, "Don't worry about deflation. All it does is pad profits.

Really? This presumed causality was nowhere to be seen in 1929-1933 or even during the lesser bout of deflation in 2006-2009.

A year-and-a-half later, global financial authorities continue to brush aside the threat of deflation.

Read this excerpt from a Dec. 4 Korea Herald article titled, "Finance minister dismisses fears of deflation":

South Korea's chief economic policymaker said Wednesday he sees no acute risk of deflation, adding that next year's projected inflation rate will be higher than this year's.

The remarks by Finance Minister Hong Nam-ki came days after the Bank of Korea announced that the third-quarter gross domestic product deflator -- a measure of inflation used to calculate economic growth in real terms -- fell 1.6 percent on-year, marking the sharpest decline in two decades.

Consumer prices rose 0.2 percent on-year in November, and the annual inflation rate has stayed below 1 percent for 11 consecutive months and fall short of the central bank's inflation target of 2 percent.

Despite growing concerns that South Korea's economy may fall into deflation, Hong told reporters that he "does not agree with worries about deflation."

However, Elliott Wave International's analysts do expect deflation to be the next big global monetary event.

Read the free report, "What You Need to Know Now About Protecting Yourself from Deflation."

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