Have your pick Bernanke, deflation or inflation, as long as you make it brief
Sir in “‘Helicopter Ben’ confronts the challenge of a lifetime” Martin Wolf, December 17, describes the very real dilemma of having to choose between ruthless deflation and ruthless inflation. The best thing to do in such circumstances is to stop thinking about how to get back to where we were and start thinking on where we want to be tomorrow. For instance in the case of our commercial banks it would be great if for a change we start thinking about what is their purpose; and we also need to remember that we have a climate change crisis proceeding simultaneously and where we won’t even have the choice of picking between deflation or inflation.
Also since in reality neither deflation nor inflation are bad things per se, if they occur instantaneously and do not prolong themselves in time, we should perhaps concentrate more on finding ways to clear out all irreversible losses instead of trying to hide them. For instance in the case of the US automobile industry it must be obvious that any infusion of fresh public funds should only happen after its restructuring.
Martin Wolf suspects “the result will ultimately not be deflation but unexpectedly high inflation, though probably many years hence” and I am not so sure of his timeframe. If markets start believing that the US is going all out for inflation, a lack of confidence, propagated at modern speeds, could bring us hyper-inflation in days or hours.
The world lost confidence because never before had it been told to trust some few so much and been so let down. Let us now rebuild that trust that allows us to wake up and feel like singing “Oh it’s a wonderful morning!”
Also since in reality neither deflation nor inflation are bad things per se, if they occur instantaneously and do not prolong themselves in time, we should perhaps concentrate more on finding ways to clear out all irreversible losses instead of trying to hide them. For instance in the case of the US automobile industry it must be obvious that any infusion of fresh public funds should only happen after its restructuring.
Martin Wolf suspects “the result will ultimately not be deflation but unexpectedly high inflation, though probably many years hence” and I am not so sure of his timeframe. If markets start believing that the US is going all out for inflation, a lack of confidence, propagated at modern speeds, could bring us hyper-inflation in days or hours.
The world lost confidence because never before had it been told to trust some few so much and been so let down. Let us now rebuild that trust that allows us to wake up and feel like singing “Oh it’s a wonderful morning!”
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