Duncan’s Economic Blog

Well Done Liam Halligan

Posted in Uncategorized by duncanseconomicblog on May 20, 2009

Regular readers of this blog will know I am somewhat fearful of deflation. They will aslo know that I think the fall in Sterling coupled with the aggressive policy response will hopefully be enough to fend it off. Not that I don’t still worry…

Regular readers might also remember Liam Halligan (economist and Telegraph writer) from this exchange on this very question with Hugh Hendry on CNBC.

Yesterday Liam wrote an article arguing that:

Its lately been argued that because the slowdown results in “spare capacity”, the Government can print money and borrow like crazy without provoking inflation. But as Bean said: “The rise in spare capacity isn’t as large as you would think simply from the projections of growth”.

Inflation is coming – don’t doubt it. The penny has now dropped.

I have also argued on this blog that the best way to beat deflation is to ‘credibily threaten’ high inflation. So well done to the Bank, the threat is coming across. And well done to Liam, I hope he keeps doing his bit and raising inflation expectations for a few more months.

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