[quote=Huckleberry]It appears like this may be a good thread to restart.
Many well known economists (and even a few dissenting members of the Fed) are now starting to become highly interested/worried about the US economy becoming deflationary over the next year.
What are Piggs experiences and thoughts regarding what they’re seeing and reading?
Rich, I know you recently wrote an article expressing your view and the low probability of this. Do you still stand by your assessment/analysis?
[/quote]
Yes.
But I want to clarify something, since this debate is so fraught with misunderstanding. Your post, as I read it, implies that the article makes some statement about short-term deflation risk. It does not; the article examines the huge difference in policy response between the US and Japan, as well as arguing that the differing policy responses will lead to different results. In my other Jan 09 article (not linked), I argued that a long-term Japan-like deflation was pretty much impossible in the US unless there is a radical change in leadership and economic policy theory. Neither articles ruled out the possibility of shorter term deflationary periods.
Just wanted to clarify what I had actually said. With that said, I’ve seen nothing to change my mind. In fact the policy response and the lack of deflation since I put those articles up has strongly supported my analysis. (Check today’s admission that the FOMC will engage in further QE for the latest exhibit).
I have to admit that I am kind of surprised to be asked such a question. Both policy response and outcomes since I wrote those articles has overwhelmingly supported my thesis that the authorities will not allow a long term deflation, even if they have to openly and massively debase our currency to achieve this goal. So of course I stand by it — why wouldn’t I?
