The Threat of Deflation?

Great recessions, such as ours at this time, and depressions always bring on the threat of deflation, That’s when economies melt down. Once they collapse they are hard to revive. Japan of the past two decades is a good example.

The question: What is the bigger threat? That deflation, or pump-priming, which the Federal Reserve is resorting to now? That is really setting the stage for another future financial bust of epic proportions.

Especially in the light of the ultra-trillion dollar budget deficits brought on by Obama administration programs on health care, to go with energy and other planning.

Yes, some economists worry more about immediate deflation than they do further off inflation. However, history tells us that deflation is a shorter-term problem.

Only a minority of economists look at the deflationary possibility. Pursuing that possibility, you do have an excuse to spend and spend, sometimes quite recklessly. Moreover, it is too often used by those who only have short-term political purposes. Long-term, many economists envision catastrophic inflation.

You might say, the American financial meltdown of 2008 and 2009 were sown in the early years of the 21^st century when the Fed worried a bit too much about deflation and then loosened funds too much as its remedy.