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Lacy Hunt: Deflation, Not Inflation, Is Coming

Submitted by Taps Coogan on the 19th of April 2020 to The Sounding Line.

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Yesterday, we shared an interview with famed economist Dr. Nouriel Roubini who warned that the world may be facing stagflation: stagnant economic growth and rising inflation as central banks around the world monetize increasingly large deficits and as supply chain interruptions become worse.

Today, we share an interview with famed economist Dr. Lacy Hunt who has a more-or-less opposing view: the US and other developed economies are looking at deflation and lower treasury rates, and possible rising corporate borrowing costs. One key to Dr. Lacy’s outlook is that, although the Fed is rapidly monetizing deficits, he believes that banks are unlikely to lend out the newly created deposits with sufficient rapidity to overcome slowing growth and rising loan-loss provisions. He warns that the spike in the money supply and lending that we are currently witnessing will dissipate before significant inflation sets in.

The interview doesn’t lend itself to the excerpts that we typically provide, so enjoy it in full above.

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