Msoane

Dispelling the Deflation Myth

Good article. Incredible graphic.

Large productivity gains in the 1990's coupled with constant downward price pressure on consumer goods as a result of the growth of inexpensive Asian imports kept the lid on price deflation and hid the effects of large money supply increases. The money supply increases showed up in financial assets and homes, which don't suffer from a technology cost curve or overseas competition; therefore you certainly can have some sectors of the economy or asset classes experience asset inflation while others don't.

Inflation Risk Is Underpriced

i agree with Arnbjorn's argument for inflation and the subsequent impact on bond prices but I think he understates the case. A looming $1.3 trillion deficit and the concomitant need to issue debt and increasingly weak demand from Japan, China and the Gulf countries is going to drive down bond prices regardless of the current relationship between aggregate supply and demand.