Tito's Blog

Deflation, or?

In the same week a received a 10%+ increase in my monthly rent for a spot in a parking silos in downtown Milan and a 7% fee hike from my cleaning service.

My deflationista stance is shaking.

Economist and FT on Private Deleverage vs Public Borrowing

Martin Wolf explains why extra government borrowing will be met by increased private (mostly corporate) savings, à-la Japanese lost decade. In general it makes a lot of sense, even though it makes two strong assumptions:

1. the somewhat paradoxical net flow of capital from developing to mature countries via reserve accumulation and currency manipulation will continue indefinitely
2. dollars and pounds will still be considered a safe heaven

On private corporation deleverage, The Economist has a good article on this week print edition (“Show us the money”) on increased cash generation by US and UK companies, due to lower investments.

Tough Choices

My earlier worries of an early tightening might come true, as G20 ministers drop support for fiscal stimulus packages.

Governments should focus more on long-term cuts (the “entitlement system”) rather than short-term measures. But the era of easy choices is over.