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HyperInflation or Deflation Depression, Which is More Probable?

News_Letter / Recession 2008 - 2010 Jul 04, 2009 - 12:43 AM GMT

By: NewsLetter

News_Letter

Best Financial Markets Analysis ArticleDear Reader

The inflation / deflation debate continues to rage as deflationists see continuing collapse in the global economies under the weight of the deleveraging debt mountain as recently iterated in a 20 minute video by the worlds foremost proponents for deflation.


On the other hand the more consensus view is that of hyper inflation as most recently voiced by Marc Faber, as a consequence of governments printing money to monetize debt to ignite economic recovery.

Which is more probable ?

My own analysis in the forecast for UK inflation for 2009 as of Dec 08, forecast that UK inflation as measured by the RPI index would fall to -1.2% by mid 2009 and thereafter see a return to mild inflation by year end to target +0.8%. UK inflation hit -1.2% in April and recorded a -1.1% rate for May, which is inline with the forecast and therefore we should continue to see a gradual trend out of deflation and towards a weak +0.8% by year end.

Therefore my conclusion remains that after deflation ends in the coming months, the following inflation looks set to remain weak into the end of 2009 and most likely for the first half of 2010 at least. I will elaborate up on the inflation outlook and forecast for 2010 later this year.

So I do not see forward signs of either deep deflation or hyperinflation, but rather weak inflation for the next 6 to 12 months.

Nadeem Walayat

Editor, The Market Oracle

P. S. Our friends at Elliott Wave International are offering our readership an exclusive 45% discount on their Financial Forecasts Service, click here for details, offer ends 11th July.

The Deflation Debate - Featured Analysis of the Week

Inflationary Crack-up Boom has Commenced in the G7 Economies!- 3rd July 09 -Ty_Andros
The Keynesian System, the Economics of Illusion- 3rd July 09 -L. Albert Hahn
U.S. Economy Heading for Japan of the 1990's or Argentina 2002?- 2nd July 09 -John_Lee
In the Future, Interest Rates Will Soar and Consumers Will be Sore Also- 2nd July 09 -David_Petch
Understanding The Dangers of Leveraged ETFs- 2nd July 09 -Ron Rowland
Commodities Sector Timing Trading for Gold, Oil, Silver and Natural Gas - 2nd July 09 -Chris_Vermeulen
Walls to Block U.S. Deflation- 1st July 09 - Jim_Willie_CB
Warning of Severe Economic Collapse- 1st July 09 - ArbitraryVote
Is America Broke- 1st July 09 - Douglas_V._Gnazzo
The Case Against Hyper Inflation- 30th June 09 -Brian_Bloom
A 20-Year Stocks Bear Market?- 30th June 09 -David Galland
Honest Money Gold & Silver Report - Market Wrap W/E 26th July- 28th June 09 -Douglas_V._Gnazzo
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The Inflation Deflation Debate and Myth of the Kondratieff Wave- 28th June 09 -Gary North
The End of the Recession? - 27th June 09 -John_Mauldin

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In my last column, I joked that with public spending out of control and the piling on of the international bailout bill, economic collapse seems to be the goal of Congress. It is getting harder to joke about such a thing however, as the non-partisan General Accounting Office (GAO) has estimated that the administration's health care plan would actually cost over a trillion dollars. This reality check may have given us a temporary reprieve on this particular disastrous policy, however an equally disastrous energy policy reared its ugly head on Capitol Hill last week.

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Astonishing to me is the fact that no one seems to understand the ultimate result of the current policies and practices of Washington D.C. and the Federal Reserve Bank, the Fed. I have studied our economic situation for about 3 hours per day  for the last 8 months and conclude we are bankrupt. Think about the facts.

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It would be hard to find someone more suited for the job of Fed chairman than Bernanke. His performance yesterday has nothing to do with his unique qualifications for the position. ... Unless President Barack Obama wants a solo pilot, he would do well to tap Bernanke for a second term.

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