Deflation Risk Still Exists in U.S.

Posted Feb 23rd 2010 4:45PM by Joseph Lazzaro
Filed under: Forecasts

Bloomberg News has published a chart summarizing a recent poll of 57 economists on inflation, and it offers several insights.

The average inflation rate expected for 2011 is lower than the rate expected for 2010: 2.14% to 2.25%.
However, the inflation range for 2011 is substantial larger than 2010. In 2010, respondents had inflation ranging from slightly less than 1% to about 4.5%. In 2011, the range was 0.5% to about 6.8%.

Further, after assessing other inflation data, the Bloomberg staff concluded that "Despite those forecasts, deflation remains a plausible possibility."

Monetary/Economic Analysis: Inflation hawks and other conservatives continue to pound the table to complain about the risk of rising U.S. inflation. However, the loss of more than 8.4 million jobs, stagnant wages in many job classifications, and tepid (at best) consumer confidence, all suggest that there won't be too many dollars chasing a limited amount of goods in 2010, and probably well in to 2011.

Further, combine the above with foreign producers who are reluctant to raise prices on goods shipped to the United States, on fear of being priced-out of the lucrative U.S. market, and the bias remains tipped in favor of disinflation/low inflation.

Tags: deflation, economy, inflation

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Reader Comments (Page 1 of 1)

2-23-2010 @ 7:27PM

william lindblad said...

Bloomberg, like Congress. is out of touch.

2-24-2010 @ 5:31AM

MyKisa said...

.....with the trillions printed, there aren`t too many dollars out there...........yeah right

2-23-2010 @ 11:54PM

alimaamoser said...

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2-24-2010 @ 4:41PM

al coholic said...

If we have 2.3 inflation in January (see link below) with virtually no loans being made by banks how the hell will there be deflation since any recovery now will require monetary expansion which can only result in serious inflation numbers. Remember....the real definition of inflation is too many dollars...period!

(http://inflationdata.com/inflation/Inflation_Rate/CurrentInflation.asp)

2-24-2010 @ 8:09PM

Peter Van Schaik said...

The real definition of inflation is not simply too many dollars. It is an increase in purchasing power relative to the goods, services, and investments the population purchases. The money supply may have been all important in the 19th century but as debt has grown in importance since the 1920's printing press money is no longer the dominant factor. In a fractional reserve banking system, the simple act of using your credit card to pay for a haircut can create additional purchasing power without any new good, service, or investment being purchased. If the additional purchasing power which circulates through the economy purchases existing goods, inflation will be the result. It makes no difference whether on not the debt is monetized: Debt chases goods just as swiftly as money. Those who cling to the notion that all inflation is the fault of the federal goverment's printing presses are as out of touch with reality as those who believe the world is flat. http://jpetervanschaik.googlepages.com

2-25-2010 @ 5:27AM

al coholic said...

I subscribe to the definition of inflation offered by Milton Freidman...

"Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output."