Roubini: Get Ready For “Stag-Deflation”
Posted on: Nov 4th, 2008 | By Contrarian Profits | Filed under Financial News
It was only a few months ago that some economists were screaming for a Fed rate hike to keep consumer price inflation under control.
Things have changed dramatically since then. The biggest economic fear for the foreseeable future is now deflation.
Economist Nouriel Roubini of New York University said that rapid decline in oil prices indicate that deflation is more of a problem than inflation.
“I think deflation is going to be the story, or what I refer to as ’stag-deflation,’ a period of economic recession and deflation,” said Nouriel Roubini. “And why do I say that? We’re now seeing the beginning of a slacking goods market with aggregate demand falling relative to supply.”
Roubini says the commodity prices that were at very high levels six months ago have fallen dramatically as demand suddenly fell as companies and consumers conserved cash. Oil prices are down more than 50 percent from their record highs in July.
Meanwhile, The Daily Reckoning’s Bill Bonner says we should prepare for “deflation now, inflation tomorrow.”
The US government is ready to pull out all the stops to reflate the economy. Eventually, this will bring inflation back with a vengeance, and take down the dollar.
