The Tiger Woods of Central Banking

This transcript from a May IMF forum on deflation makes for interesting reading, if only to highlight the extent to which the mythology of the inflation fix is so seriously entrenched among IMF economists: “In sum, while risks of generalized global deflation appear small, there is an increased vulnerability to deflation in several countries. The main policy message is that a more symmetric attention to risks of falling, as well as rising, prices is warranted. Given the costs of deflation, it is desirable to prevent it from setting in. Where it has taken hold, aggressive policies to contain and eradicate deflationary expectations are essential.” The final speaker sums up: “We shouldn’t be talking about liquidity traps, but sand traps, and I’m glad for the United States that it has the ‘Tiger Woods’ of central banking playing for it.”