Following Japan's Deflationary Course. For Now.

Since the collapse of the housing market in the United States and the beginning of the global financial crisis, the Federal Reserve has made avoiding deflation a major priority, recalling the experience of Japan after its bubble burst in the early 1990s. The Fed has set an annual inflation target of 2 percent or a little lower, but is not getting it.

This week’s CPI was about as tame as you could ask for.  Too tame, in fact.  Granted, there’s no food or energy in there but who really eats or drives in this country anyway?

But I digress…

The New York Times compares our pre- and post-bubble period with the one Japan has gone through.  So far, we’re tracking Japan’s deflationary course almost perfectly:

Of course, should Bernanke succeed in pushing through his QE 5 policy circa 2013, we may just stop “pushing on a string” and actually have some inflation to show for all our efforts.

Stay tuned, I guess.


The Waiting Game on Inflation (NYT)