posted on May, 9 2009 @ 10:14 PM
The greater of two evils
Inflation is bad, but deflation is worse
"MERLE HAZARD, an unusually satirical country and western crooner, has captured monetary confusion better than anyone else. “Inflation or
deflation,” he warbles, “tell me if you can: will we become Zimbabwe or will we be Japan?”
How do you guard against both the deflationary forces of America’s worst recession since the 1930s and the vigorous response of the Federal Reserve,
which has in effect cut interest rates to zero and rapidly expanded its balance-sheet? On May 4th Paul Krugman, a Nobel laureate in economics, gave
warning that Japan-style deflation loomed, even as Allan Meltzer, an eminent Fed historian, foresaw a repeat of 1970s inflation—both on the same
page of the New York Times.
There is something to both fears. But inflation is distant and containable, while deflation is at hand and pernicious."
Do read the whole article.