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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

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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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