Move over deflation

16th March, 2009

The St Patricks weekend and the easing of political activity has allowed me to catch up on some matters of interest. I have written elsewhere about how stimulating global demand is the essential ingredient of getting out of this recession. I came across an excellent article in the Financial Times, available here that sums up the consequences of this:  

It clearly shows how increased money supply will erode the real value of debt to allow both increased consumer spending and higher business investment. This will mean that prices go up again. However it will mean higher profit levels and investment to stimulate higher income levels. As somebody said to me last week when did a pack of crisps go from 13p to 75 cent? It is that kind of change that actually kicked into higher income levels as well.