Phony Deflation Worries
These days deflation risk is a concern that many central bankers, pundits, and journalists voice regularly. Concern may be the wrong word; it might be better called an obsession. Central bankers – we are told – must battle deflation risk today at all costs because deflation slows growth, and may cause recessions and financial system collapses. As I will show in this essay, the economic risks associated with disinflation or deflation are being exaggerated by central bankers and others.
These days deflation risk is a concern that many central bankers, pundits, and journalists voice regularly. Concern may be the wrong word; it might be better called an obsession. Central bankers – we are told – must battle deflation risk today at all costs because deflation slows growth, and may cause recessions and financial system collapses. As I will show in this essay, the economic risks associated with disinflation or deflation are being exaggerated by central bankers and others.
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