Barack Obama: welcome to the rest of your political life!
It’s one that may contain either hyperinflation, or deflation. You might want to get your head around those two terms, because you, more than any other man on earth, will have to deal with the situation, and your historical memory will be created by how effectively you handle their threats.
Deflation is something neither Canada nor the United States has experienced for decades (profound deflation of the 1930s), and hyperinflation is something no one in the U.S. or Canada has experienced. If you want a taste of hyperinflation, go to Zimbabwe today or Germany in the 1920s.
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According to a surprising number of analysts, the two opposing scenarios are realistic possibilities, and the two terms keep cropping up in unhysterical places like the Wall Street Journal and the Globe and Mail’s Report on Business.
I find that gratifying, because as readers of our newspaper know, I have been working on a series discussing an element of the inflation versus deflation question. I’m talking to various gurus about whether the predictions of a “long term commodities bull market” and high inflation still make sense, or whether we’re sliding into a deflationary period. The difference for farmers is crucial: a commodity boom, which produces inflation (when the cost of raw materials like food and oil go up, inflation is incited) tends to give farmers more wealth because they produce commodities that are earning prices that are increasing faster than the overall rate of inflation. A deflationary period tends to rob farmers, because the farmer is selling crops that have prices generally falling faster than the overall rate of deflation.Â
Farmers suffered from limited deflation since the end of the 1970s commodity boom until a couple of years ago, but a true deflationary spiral would be far worse.
Of course, the odds are still on neither extreme scenario coming true. An era of almost no inflation would probably be best for most people, although farmers would benefit from healthy commodity price inflation. People with a bunch of cash would prefer a slight deflation, which makes their money more valuable. And right now, with inflation falling but still existing, and commodities fallen but not completely collapsed, there’s no evidence to suggest either hyperinflation or deflation are necessarily coming.
But some of the gurus I’ve spoken to have a lot of frightening things they’re predicting. And when even middle-of-the-road analysts like those in the main financial newspapers begin chattering about the two poles as possibilities, it’s probably worth thinking about what you’d do if either actually occurred.
And if you’re Barack Obama, you’d better figure it out fast, because if either comes to pass, you’ll be forever known as (if you’re lucky) The President Who Faced-Down _________ (fill in blank here). If you’re unlucky, you’ll be lucky if you end up being known as Herbert Hoover the Second.
