Academic

HMM: Pimco: US faces real risk of outright deflation. ?Pimco, the world?s biggest bond fund mana?

By Glenn Reynolds

HMM: Pimco: US faces real risk of outright deflation. “Pimco, the world?s biggest bond fund manager, has warned the US faces a prolonged period of stagnant growth and a real risk of outright deflation, similar to what Japan experienced in 1990s. Echoing a warning by M&G’s bond team on Monday, Pimco portfolio manager Scott Mather says if a Japan-like deflationary scenario becomes the baseline for the US, it would have ‘profound implications for asset prices’.”

Deflation hurts debtors. The U.S. government is the world’s biggest debtor. Therefore, I’m pretty confident the U.S. government will do everything it can to avoid deflation. Of course, it may not be able to succeed . . . .

Full post as published by Instapundit.com on August 11, 2010 (boomark / email).