Claus Vistesen

Communication at the ECB: Lost at Sea?

"tell me more of the "principle of falsification." this interests me"

Well, this is how it goes ... (in my opinion). I am arguing that some economies will be perpetually stuck in deflation on the back of this which means that global monetary policy won't go back to "normal". These economies would be (in the first instance);

Japan
Spain
Key economies in Eastern Europe
(possibly) Germany

Basically, I think that we may be fighting (the prospect of) deflation for much longer than we are currently willing to admit and that more countries will now be dependent on exports to achieve growth. This can easily be falsified I think since if we get domestically induced inflation in the economies above (i.e. demand pull inflation) and strong domestic demand growth I will be wrong. Of course, headline inflation will live a life of its own and stagflation is not off the table yet.

Claus