Thoughts from the Frontline

Presupposing Deflation

By John Mauldin

May 17, 2003

Pre-Supposing Deflation
Deflation Bad. Inflation Good.
Whip Deflation Now
No Pain, No Gain

The topic du jour is deflation. I must have read 40 or so treatises on the deflation debate this week alone. Some are rather lengthy and boring (some economists must intentionally try to be obscure and hard to read - you can't be that bad without really trying), and others are quite thought-provoking. I have written at length on deflation in the past, but from the volume of questions I am getting, it seems time to charge once more into the breech. I will try to come at the debate from a rather different point of view, lay out the risks, and see if we can find some investment insights.

Why are there such a wide variety of opinions on whether we will have inflation or deflation, and what the results will be? To get an understanding of the issue, we need to briefly delve into the philosophical arena.

Pre-Supposing Deflation

A good place to start will be a letter I got from a (former) reader.

"After reading your e-mail data for months now and comparing it to…

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