A healthy attitude to deflation
Add BT as a preferred sourceTHE experts got 2014 wrong. As Barclays points out in its latest Global Outlook for investors, the consensus at the beginning of the year was that GDP growth would pick up fairly strongly in developed economies, government bond yields would finally rise and commodity prices would hold steady at elevated levels. Wrong, wrong and wrong.
Predictions are notoriously difficult. Still, it is hard to excuse this failure as fate or bad luck. It looks like most economists made a fundamental error. They underestimated the power of one of the great economic forces of the epoch: disinflation.
In almost all developed economies, and also in China, prices and wages have been rising less quickly than expected for several years. In a surprising number of countries - and now for a surprisingly large collection of commodities - prices are actually falling. The disinflationary wave has even extended into the previously highly inflationary London and Paris housing markets.
