Deflation Blues

Ofcourse, the risk in the US is deflation, demand is deficient and inflation is 3%, almost negligible. People who say deficits would drive interest rates are expecting higher demand, but i disagree it will crowd out private investment; it will rather supplement the recovery. Here, the process is demand increases first than supply, just opposite of supply side economics or innovation-economics. We are in a different age and innovation is very limited. Interest rate, for past two years, are at their institutional minimum is a clear sign of liquidity trap. Fiscal measures are required. And, as the demand catches, so will inflation and interest rate, but their magnitudes will be restricted for quite some time and will depend on how fast demand increases.