No. of Recommendations: 0
<< Does a central bank like the Fed have it within its power to induce inflation, or at least counter deflation, under any circumstances whatsoever? >>

Easy,

I don't think that low rates will always stop deflation either, any more than high rates will cause it. You only have to look at Japan's recent troubles to get a good example of that.

I think the chances of deflation here are quite high if the public ever starts thinking that bad times are around the corner. In some ways, it's already here, and signs of it are all around.

As to a resurgence of high inflation, I think that they would have to actually give it away (drop it from helicopters or send checks in the mail like the Federal Govt. has been doing lately). Low rates are no good unless there is loan demand out there, and loan demand goes away during deflation, except for the need to fund debt service.

Ed.
Print the post  

Announcements

When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.