Evans-Pritchard: Global Deflation Still a Risk

Tuesday, September 15, 2009 3:05 PM

By: Julie Crawshaw

Deflation is spreading from the core of the global system to the most unexpected regions of the world, observes financial journalist Ambrose Evans-Pritchard.

Prices are sliding in Peru, Chile, Colombia, Paraguay, Bolivia, Ecuador, Guatemala, and El Salvador, to the consternation of everybody — and "any misjudgment by the big central banks from now risks setting off a chain-reaction that may prove very hard to stop," Evans-Pritchard writes in the UK Telegraph.

Evans-Pritchard points out that because authorities failed to anticipate this, investors should be wary of their assurances that we face nothing more than a brief dip in prices before rising energy costs bring back inflation.

“The sum of economists in the world (outside Japan) familiar with the cultural and psychological dynamics of deflation can fit into one London bus, and most are historians of the 1930s,â€