Central bank inspired asset price bubbles eventually pop, and popping bubbles are deflationary. Today the 30-year bond yield dropped intraday to .6987 percent, which certainly suggests deflation. That may be the low for yields, but the economy is going to follow the stock market and that also suggests deflation. And look whats happening to the oil market. Watching the Federal Reserve’s balance sheet, people have been expecting inflation since the last financial crisis. Wouldn’t it be just like markets if we got debt deflation and depression instead? It might mean we don’t get that new high in gold many are now predicting. From Mish Shedlock at moneymaven.io:
Former Chairman Bernanke says Fed Has Many Tools to Deter Recession.
Dear Mr. Bernanke
Please do yourself a favor and stop making a fool out of yourself.
For starters, let me point out it was indeed impossible to unwind the Fed’s balance sheet. How far did you get? And what is the Fed doing now?
Secondly, you would not know inflation if if jumped up and spit you in the eye. You and your group-think buddies never consider asset bubbles as inflation.
Economic Challenge to Keynesians
Of all the widely believed but patently false economic beliefs is the absurd notion that falling consumer prices are bad for the economy and something must be done about them.
My Challenge to Keynesians “Prove Rising Prices Provide an Overall Economic Benefit” has gone unanswered.
BIS Deflation Study
The BIS did a historical study and found routine deflation was not any problem at all.
“Deflation may actually boost output. Lower prices increase real incomes and wealth. And they may also make export goods more competitive,” stated the BIS study.