Thursday, 12 March 2009

Inflation versus deflation

Halligan wipes the floor with the deflationist Hendry. Halligan focuses on the data, while Hendry throws out insults.


Anonymous said...

Guess that's why markets exist - I didn't read it that way Alice. However, Hendry was rude.

Imo, ignore the 'traditional' measures, the world's wealth loss in the past 18 months is deflationary - unavoidable.

Irrational Doomsday Blog said...

Yeah the deflationist point of view wasn't properly expressed in that argument.

Those are the two main schools of thought in the doomsayers' camp- debt-deflation spiral or runaway inflation.

I'll put the debt-deflation point of view in an actually coherent argument- when you're talking about the largest credit bubble in the history of the world unwinding, this school of thought believes the government will be simply unable to reverse the deflation caused by the tremendous destruction of nominal wealth. Even what would have been historically outrageously inflationary policies will pale in comparison to the worldwide destruction of wealth as this bubble pops.

On the other side of the coin, people believe that since, allowed to run without limit, debt deflation would wipe out everything in a fractional reserve system, especially for debtor nations like the UK and US, the government will take any and all actions to return to inflation, and will be unable to control or pull out of their stimulative policies in order to prevent a runaway inflation scenario.

Anonymous said...

Hendry 4:25 in: "I know that your head is firmly lodged somewhere"...


Seema said...

Halligan is so much more handsome.

London estate agent said...

If they let them go on for a few minutes more, a fight would have broke out.

electro-kevin said...

IDB at 15.16 Thanks for that explanation.

So we have two scenarios:

Deflation which makes our debts worth more - we get poorer

Inflation which makes our money worth less - we get poorer

ZED said...

Remind me; how does more government debt and worthless script create jobs and prosperity?

electro-kevin said...

We get poorer.

Why don't you just rename this blog such, Alice ? Every post:

We get poorer.

Roll on death.

Rick said...

I think Hendry has made the common mistake of confusing negative growth with deflation.

Alice Cook said...


I think you are spot on there. The UK is about to get poorer as a consequence of a financial crisis. Inflation, on the other hand, is about goods prices.


Alice Cook said...


Actually, I have been thinking about renaming the blog. Somehow, UK bubble is a little dated. However, I am not sure that "We get Poorer" works either.

Any suggestions are most welcome.


electro-kevin said...

I DID suggest another name:

Roll on Death

(And I'm not talking about a macabre new deoderant here)

Anonymous said...

Rename the blog: "We're all subprime now".

A phrase coined by the late (great) Tanta on Calculated Risk blog.

Alice Cook said...


Roll on Death - it is too dark.

We're all subprime now - potentially a good name, but perhaps for an American blog.

So, I am stuck with the dated UK bubble.


dearieme said...

How about
"UK bubble, bubble, bubble....."
Meant to remind you that the Titanic was unsinkabubble, bubble, bubble.

Or even "UK unsinkabubble, bubble, bubble"?

ed thomas said...

Uk burst house bubble . com ps. told you

electro-kevin said...

Graphs with Laughs

Because you're such a hoot, Alice.

electro-kevin said...


Or ...

Thinking the Impossibubble.

Anonymous said...

Simple to remember - "UK Bubble Popped"

A David

Frank Fartwell said...

Jeez what a tosser that Hendry is.

I did not notice him put forward a SINGLE couterargument or anything to contradict Halligan's arguments, only insults and put-downs.

A true guttersnipe.

AntiCitizenOne said...

New Blog Name suggestion:

"Alice Plays Pop!"

Anonymous said...

I have no doubt Halligan is right. And the fact that CPI is still way above the BoE target says a lot.

Yes, we may have a deflationary environment but inflation, this time, is likely to be caused by a currency event - such as sterling hitting the buffers in a big, big way.

And if that occurs, and I happen to believe it will because we are run by a bunch of economic illiterates and confidence will evaporate, hyper inflation will be the result.

See Iceland.

Liam said...

If gordon brown was an honest man he would probably say that he would like to see inflation increase to 10-15%.

But Haligan is right...the only price falls will be in overvalued assets only the British buy like our shoebox houses.

Japan had strong exports to keep it going through its credit crisis, we have nothing. Its going be very bad indeed.