econintersect.com
       
  

FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.



posted on 16 October 2015

An Economic Truism: "Recession Kills Inflation"

from Lakshman Achuthan, Co-Founder and Chief Operations Officer of ECRI

The world's major central banks have been engaging in competitive devaluation, amounting to desperate grabs for bigger shares of a barely-growing global economic pie. Yet, deflationary forces continue to be transmitted through trade, with most economies experiencing a degree of export price deflation matched only during the Global Financial Crisis.

Given the effect of currency movements on inflation in individual economies, it is instructive to examine year-over-year CPI growth in the Group of Seven (G7) economies as a whole. As the chart shows, core CPI inflation in the G7 economies is hovering around 1½%, as headline CPI inflation remains near zero. Said another way, G7 core inflation is closer to the low of 1.1% seen after the 2001 recession than its cycle highs of 2% in the immediate vicinity of the 2001 and 2007-09 recessions.

The chart demonstrates the truism, "recession kills inflation." It shows G7 core inflation falling for years after the 1981-82, 1990-91, and 2001 recessions in the U.S., and for more than a year after the Great Recession of 2007-09. Most of these economic downturns also amounted to global recessions.

With G7 core inflation already so low, it is clear that none of the major central banks are in a position to start a rate hike cycle anytime soon. Thus, they are effectively shackled to the zero lower bound for the foreseeable future.

Meanwhile, global growth is already slowing, with the U.S. having spent 2015 in a growth rate cycle downturn that we flagged nearly a year ago, and looking ahead, global growth is slated to slow for the foreseeable future. So, even though a U.S. recession is not yet at hand, a 2016 recession could push down already-low G7 CPI growth into deflationary territory - at a time when the world's central banks are out of ammunition.

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical News Post Listing










Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, using Livefyre just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.



You can also comment using Facebook directly using he comment block below.





Econintersect Contributors


search_box

Print this page or create a PDF file of this page
Print Friendly and PDF


The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.


Take a look at what is going on inside of Econintersect.com
Main Home
Analysis Blog
A New Era of Central Banking?
Is Free Trade Harming the Economy?
News Blog
01 February 2017 FOMC Meeting Minutes: Little Seems to Have Changed Since the Previous Meeting
An Inside Look At Doomsday Bunker Homes With A Price Tag Of 2 Million
January 2017 Headline Existing Home Sales Surprisingly Good
China Moves To Put North Korea In Its Place
Trucking Data Improves In January 2017
February 2017 Chemical Activity Barometer Has Strong Gain
Infographic Of The Day: 2017's Top New Year's Resolutions
Early Headlines: Asia Stocks And Dollar Up, Oil And Gold Steady, Nat Gas Plunges, Fed's Williams Says Low Rates Will Last, Steep UK Brexit Bill, Greek Poverty, China Stocks Look Up? And More
Climate of the Southwest
Did the Romans Create both Christianity and Islam?
The Psychology Behind Trump's Awkward Handshake ... And How To Beat Him At His Own Game
Most Lawsuits Against Trump Related To Travel Ban
Average Gasoline Prices for Week Ending 20 February 2017 Statistically Unchanged
Investing Blog
The Real 401k Plan Manager 20 February 2017
Investing.com Technical Summary 21 February 2017
Opinion Blog
The Blame Game
Fascism Defined And Described By Oswald Mosley
Precious Metals Blog
Deflation And Gold: A Contrarian View
Live Markets
22Feb2017 Market Update: DOW Rises To New High, Are Investors Betting That Nothing Will Go Wrong In Next Few Months, Crude Prices Slip Further, Investors Are Way Too Optimistic
Amazon Books & More






.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government





























 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2017 Econintersect LLC - all rights reserved