90% of the Developed World Has Eased … But We’ve Still Got Deflation?

Why Monetary Policy Is Failing

What should we make of the fact that core inflation in the U.S. is just as low as in the Eurozone if measured on the same basis?

David Rosenberg – former chief economist for Merrill Lynch, and now chief economist for Gluskin Sheff comments:

I don’t know whether to feel good or uneasy about the fact that 90% of the industrialized world economy is now anchored by near-zero or negative short-term rates. At one level, this should be supportive of risk assets; at another level, it is a symbol of how fixed-income investors and central banks see the world — deflation at a time of ultra-low rates is certainly not a confidence builder.

Remember, quantitative easing actually leads to deflation in the long-run.

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  • Big Bear

    It’s important to remember that the entire economic discussion proposed by the likes of Merrill Lynch is based on a system of predation that takes from the 99% for the benefit of the 1%. “Inflation” may be good for the vampires of the Vampire State but for the rest of humanity, it sucks. Stuff like what David Rosenberg peddles is hired and paid for by these predators, serves their interests entirely and views the rest of humanity from their perspective. Another word for “investment” is toll-taking, and 99% of humanity pays the toll. People like David Rosenberg are hired by the vampire to whisper to his victims ‘this won’t hurt a bit — in fact, it’s GOOD for you.’ Such hirelings deserve nothing but contempt.

    • unheilig

      Excellent post BB, thanks.

  • lew

    ‘Deflation’ is such a miserably useless term for this situation. How did that get started? It builds Keynes into economic thinking, really means just ‘business downturn, lenders don’t find qualified businesses and people’, has no independent explanatory power. Screws up thinking, doesn’t help it. Stop that.

    Shadowstats says 12.5% inflation when measured by 1980s standards. Pretty much what I see in the grocery store, cheese I used to buy for $2.50 a pound is now $7.50.

    In 1980s, we had stagflation, same as now. Terrible economy, no jobs, with high inflation.

    • jadan

      Deflation means too little money chasing too many goods & services. Deflation means people have no money: they subsist. Deflation is created by the gold standard or by very tight monetary policy. Tight monetary policy means high interest rates. What we call inflation is created by our financialized economy where financial “products”, like debt-based securities, are counted in GNP. The paper profits of “finance” devalue our currency and appear as inflation. The financial sector, to use the metaphor Big Bear uses above, is a vampire class. Their speculation is a tax on the rest of us in