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Benedicte Gravrand, Opalesque Geneva: As inflation rises, every dollar will buy a smaller percentage of a good. While deflation will mean a decrease in the general price level of goods and services. These two economic conditions are both in the waiting room. The consensus would like the former to come in but the latter seems closer to our door.
Currently, inflation remains generally very low; some euro zone countries are in deflation; and the money supply is barely growing (up 2.5% year-on-year), says The Economist. Nominal and real GDP growths have been on the same downward trend as bond yields. "QE may help underpin asset prices, but not feed through to the wider real economy, or if it does, the lags involved could be especially long."
Quantitative Easing (QE), which was supposed to stimulate economies, has failed to raise inflation expectations in the US, Japan, the UK and China, adds zerohedge.com. Narayana Kocherlakota, the Minneapolis Fed chief, suggested as far back as 2011 that zero rates and QE may perversely be the cause of deflation, not the cure that everybody thought. This caused consternation, and he quickly retreated, reports ...................... To view our full article Click here
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