Monday, March 2, 2009

Forget about Inflation—Deflation is the Real Concern According to German Economics Professor

Hans-Werner Sinn, a professor of economics and finance at the University of Munich and President of the Ifo Institute, wrote today in Financial Week that the downward price spiral will actually boost the cost of capital for companies globally. Fears that the flood of cash pouring into the global economy might touch off a destructive round of inflation are unfounded, writes Hans-Werner Sinn. He says liquidity is expanding because the private sector is hoarding the money instead of spending it. Deflation is the larger threat, Sinn wrote today.