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The Rising Threat of Deflation

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John Makin’s paper – “The Rising Threat of Deflation” – prompted Paul Krugman to write that the report read “just like something…I might have written.”

So, does Makin - a former consultant to the U.S. Treasury Department, the Congressional Budget Office, and the International Monetary Fund and now visiting scholar at The American Enterprise Institute – agree with the New York Times columnist that another round of fiscal stimulus is now necessary?

Answer: no, the fiscal stimulus has been poorly designed and wasteful, Makin says. “We needed to do the right thing and we didn’t,” he emphasizes.

Check out the interview he offered this week here.

For more on the economist’s views regarding deflation, also tune in for the interview he did with CNBC earlier in the week, in which he argues - likes St. Louis Federal Reserve President James Bullard - that it’s now time for the Fed to step up and respond to the threat of deflation.

Of course, there’s just one problem: as Jon Hilsenrath of The Wall Street Journal recently pointed out, economists have slowly realized they have no idea how deflation really works.
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