chemgal comments

Posted in: Yoshinoya's dilemma: Whether to lower prices or not See in context

Supercub, you are only half right. Deflation indeed does discourage investment, for obvious reasons, and that's what causes the deflationary spiral. But deflation does not lead to recessions. Deflation is the net effect of a severe credit crisis culminating in a depression; Japan has been in a depression now for 20 years. It is the poster boy for why Keynesian economics does not work--in Japan, or elsewhere. Net debt/GDP is currently over 200% in Japan, the highest in the world, and still they keep it up with QE. If it hasn't worked after 20 years, and countless zombie banks, why should it magically work now? A question that both Mr. Obama and Mr. Brown should pose to themselves, if they are at all honest.

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