Photo Credit: Bloomberg Business WeekBy Peter Coy. Deflation is like a black hole, sucking seemingly everything into itself. Switzerland succumbed to the vortex on Jan. 15 when the central bank gave up trying to keep its currency from rising—a defeat that will punish the Swiss economy by making the nation’s goods more expensive on world markets.
Could the U.S. be next? The U.S. dollar is up about 11 percent since last summer by the Bloomberg Dollar Spot Index, a rise that makes American-made goods less competitive. And there is a whiff of deflation in the air this morning with the news that the U.S. Consumer Price Index fell 0.4 percent in December from the previous month, the biggest decline since the economy was in free fall six years ago. “Deflationary pressures continue to build,” Scott Anderson, chief economist at Bank of the West, wrote in a report today, Jan. 16, that cited a drop in import prices and came out before the news about the Consumer Price Index.
The bottom line is that the U.S. is probably safe. The economy is strong enough that it’s likely to withstand the deflationary drag emanating from Europe. The U.S. should expand a little more than 3.1 percent in 2015, better than the estimated 2.4 percent this past year, according to the median forecast of economists surveyed by Bloomberg. (Read more about the deflationary worldwide vortex HERE)
Why U.S. Inflation is not Here to Stay
By Mehreen Khan. The world economy is in the grip of a deflationary crisis. Or at least that’s what most headlines seem to scream.
In fact, it’s probably more accurate to say there are two types of deflation going on in the developed world right now – the good type and the bad type.
It’s hard to discern which dynamics are at play where, but plummeting oil prices are undoubtedly part of the benign deflation that has helped push down price indices over the past months.
There are other types of beneficial deflation too. This includes when enhanced productivity leads to a better supply of goods and services and results in prices falling.
But if 2015 is likely to be the first year since the Great Depression that every major world economy will see inflation fall below 2pc, what does this mean for our longer-term prospects? (Read more from this story HERE)