11/01/2015 by socialistfight
The spectre of deflation still haunts the world economy.
The huge fall in energy and other commodity prices towards the end of 2014 has driven the overall rate of inflation of prices of all commodities down. Combined with faster growth in GDP and employment in the US, this suggests a more optimistic scenario for capitalism in 2015. Lower gasoline prices means that American and other households can spend more money on other goods and so boost demand.
At least, that is the argument of the optimists among the mainstream. This argument was recently well presented by Gavyn Davies, former chief economist of Goldman Sachs and now a columnist for the FT (http://blogs.ft.com/gavyndavies/2015/01/04/demand-side-gains-for-the-global-economy-in-2015/).
As he put it: “After several years in which inadequate demand has seriously constrained activity in the global economy, causing repeated downgrades to growth forecasts, 2015 should see an improvement. Lower oil prices and a more demand-friendly fiscal/monetary policy mix should result in faster growth…
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