Podcast with Roger Bootle on deflation
Listen now to my latest podcast with Roger Bootle , Economic Adviser to Deloitte. In it he discusses the impact of deflation, how it affects spending decisions, and its impact on the wider economy.
Many of us have never lived through a period of sustained deflation, such as the 1930′s. Its effects on spending can be crippling – why buy today if it will be cheaper next week? So consumer spending, and even capital investment projects are delayed adding to the downward spiral.
Remember taking on those large mortgages, on the grounds that in a few years inflation will have eaten into the real value of the debt? Well, in a deflationary economy the real value of debt rises!
So are policy makers now in a better position to avoid the mistakes of the 1930′s?
Roger’s views are always worth listening to. In the last podcast he suggested interest rates should fall dramatically, even to 0%. This was well before the large cuts took place.
