Inflation - is it here to stay?
For those who remember the 1970s, the thought of inflation may well fill them with fear. Should we be worried now? A common definition of inflation is “too much money chasing too few goods”. If lots of people want to buy a house, then it may be sold by auction allowing for the price to “inflate” significantly above what had been expected previously. The financial crash of 2009 led to fear that the world’s financial plumbing would seize up completely, resulting in such a collapse in demand that deflation would follow. Deflation is where prices fall from one year to the next. This leads to consumers delaying purchases: in the expectation of getting a better deal later. An absence of demand makes it very hard for an economy to grow and develop. An example of this is Japan where the economy has been stagnant for three decades. The central banks of the developed world have therefore spent the past twelve years desperately trying to avoid following Japan in the deflation trap. They have