Japanese Style Deflation Fear Strikes Global Bond Markets

Interest-Rates / Deflation
Aug 12, 2010 - 09:33 AM

By: Gary_Dorsch

The US-economy has not experienced sustained deflation since the Great Depression of the 1930’s, when consumer prices fell 10% between 1929 and 1933. But Japan has been battling falling prices since 1995, – triggered by the bursting of the Nikkei-225 equity bubble, and a unrelenting slide in land prices. Central bankers and macro-economists from all corners of the earth have been studying Japan’s descent from its giddy economic prosperity in the 1980’s, and into the deflation trap in the 1990’s, that Tokyo’s financial warlords have still been unable to remedy.

Nowadays, central bankers must be watchful, - not only against the traditional worry of inflation, but also to defend against the devil of deflation, - well before inflation dwindles to zero-percent. That’s because deflation is more debilitating to economies - and harder to overcome - than inflation. In Australia, Brazil, China, Chile, Israel, India, and Peru, central bankers have tightened their monetary policies this year to control inflation. However, in England, Japan, and the United States, and to a lesser degree in the Euro-zone, central bankers are engaging in the radical scheme of “Quantitative Easing,â€