Thursday, October 1, 2009

Rosenberg Says Deflation is Here, People Have No Clue How Weak the Economy Is

Brian Milner of the Globe and Mail reports on David Rosenberg's comments.

"We are certainly in a deflationary state,” said David Rosenberg, chief economist and strategist with Gluskin Sheff and Associates in Toronto. “Of that, there's no doubt,” Mr. Rosenberg said."

Note that Mr. Rosenberg was talking about wage deflation back in July.

The current article discusses that current overcapacity, dimishing credit, smaller corporate and consumer spending (smaller consumer demand), is spreading deflation from Japan to Europe and the U.S.

Inflation in Japan was measured at -2.4% in August (year over year figures), according to the BBC. Stagflation there has been rampant for the last 20 years. Germany has also had through 4 months of falling prices. GDP in Canada has just been reported as a flat 0.0.

Deflation is "harder to stamp out once it becomes embedded in an economy, as happened during the Great Depression", says Mr. Milner.

“I think people still have no clue as to just how weak the economy is,” Mr. Rosenberg said.
Remove the “impressive medication” administered by governments, and most economies are at a virtual standstill. The U.S. economy faces a decade of stagnation, he said. “That's a perfectly plausible scenario.”

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