IMF head Christine Lagarde warns of deflation risks

wotsthat

http://www.bbc.co.uk/news/business-25752936

The head of the International Monetary Fund has warned about the risks to global economic recovery of deflation.

Christine Lagarde said that "optimism is in the air" about growth, but the recovery is still "fragile".

"If inflation is the genie, then deflation is the ogre that must be fought decisively," she said in a speech in Washington.

Deflation can reduce personal consumption as people wait for prices to fall further, and discourage investment because it can raise the real cost of borrowing.

I imagine the comments are aimed mainly towards Europe where it looks as if they're going to give deflation a try.

..be interesting to see if it's the 'nice' sort of deflation that some expect.

CLAPTON

wotsthat wrote: »

http://www.bbc.co.uk/news/business-25752936





I imagine the comments are aimed mainly towards Europe where it looks as if they're going to give deflation a try.

..be interesting to see if it's the 'nice' sort of deflation that some expect.

expect a London house price collapse any day soon?

Thrugelmir

wotsthat wrote: »

I imagine the comments are aimed mainly towards Europe where it looks as if they're going to give deflation a try.

Little choice given the high levels of unemployment.

Generali

wotsthat wrote: »

http://www.bbc.co.uk/news/business-25752936





I imagine the comments are aimed mainly towards Europe where it looks as if they're going to give deflation a try.

..be interesting to see if it's the 'nice' sort of deflation that some expect.

I don't think anyone would be expecting 'nice' deflation in Europe.

lvader

wotsthat wrote: »

http://www.bbc.co.uk/news/business-25752936





I imagine the comments are aimed mainly towards Europe where it looks as if they're going to give deflation a try.

..be interesting to see if it's the 'nice' sort of deflation that some expect.

Inflation is pretty low in the US as well and they are still printing money.

Masomnia

Is there such a thing as 'nice' deflation?

The price of one or two items falling isn't really 'deflation', imho.

wotsthat

Masomnia wrote: »

Is there such a thing as 'nice' deflation?

The price of one or two items falling isn't really 'deflation', imho.

The nice sort is where the price of 'essentials' falls, there's no downwards pressure on wages, the 'prudent, who have been sat on cash find it increases in value with no effort and we all live happily ever after.

i.e. it's a fantasy but some do live in hope

Bantex_2

wotsthat wrote: »

The nice sort is where the price of 'essentials' falls, there's no downwards pressure on wages, the 'prudent, who have been sat on cash find it increases in value with no effort and we all live happily ever after.

i.e. it's a fantasy but some do live in hope

Apparently in the 30s UK depression there was deflation. In the South wages went on increasing and employment stayed high. Many saw their standard of living increase quite a lot. Bit different in the North though.

Thrugelmir

Masomnia wrote: »

Is there such a thing as 'nice' deflation?

The price of one or two items falling isn't really 'deflation', imho.

Middle ground is disinflation.

Disinflation occurs when the increase in the “consumer price level” slows down from the previous period when the prices were rising.

dryhat

Deflation due to collapsing demand feels bad because of collapsing demand not because of deflation.

michaels

dryhat wrote: »

Deflation due to collapsing demand feels bad because of collapsing demand not because of deflation.

Tell that at to the people with loans fixed in nominal terms and incomes/assets priced in real terms and their creditors...and those with cash who have deposited it with the creditors...