Deflation, Why this is a Big Deal – Part 3 of Discussion

I keep using the word unprecedented in terms of talking about what has happened with the QE scenarios over the past few years, both in the US and the mimics,  in Japan, China, and Europe.  Take a look at this post on ZERO HEDGE by Tyler Durden over two years ago, things are even more stretched now and the potential switch to DEFLATION as the FED BALANCE SHEET declines will be even more dramatic:

Spot the point in this 803 year timeline of world inflation, when the Fed was created.

The chart above comes courtesy of Jim Reid’s fantastic “Journey into the Unknown” which we will dissect in much more detail shortly. For now we wanted to bring our readers attention to what is arguably the most important aspect of modern monetary times: the advent of persistent inflation, and the disappearance of deflation.

 Figure 18 shows median global inflation first from 1209 (left) and then from 1900 (right). As we’ve discussed in previous notes inflation took on a totally different persona after the start of the twentieth century. The charts are again on a log scale to allow us to easily see the near exponential increase in inflation over the last 100 years or so, especially relative to what occurred before. Note that had we used average instead of median, the chart would look almost absurd given the extreme levels of hyperinflation seen in several  countries over the last century. The data behind the graph is based on a full set of 24 countries where we have inflation data back to 19001. Prior to this many countries have data that goes back several decades with some back through the centuries. We have  included data as and when it becomes available.

 

 

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