Economists really do not have a consensus as to what will happen in the next little while. At the moment, they cannot agree whether inflation or deflation is the bigger threat.
Deflationists believe that the cooling economy will lead to decreased consumption. This, combined with lower gas prices, lower housing prices, and the plummeting stock market, will cause the consumer price index to drop below zero. For example, the Great Depression of the 1930s was a deflationary period when prices of goods and assets significantly declined.
On the mother hand, there are economists who are also predicting global inflation. With the worldwide demand for financial bailouts comes the temptation for governments to print more money, which will lead to inflation. For example, the 1973 recession featured runaway inflation in Canada amid oil shortages. At the moment, in Argentina, inflation has reached 25 per cent. In Britain, inflation is currently at a 16-year high.
What do you think will happen in these uncertain times?
