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John Makin is not exactly a raging lefty economist, but he’s got his hair on fire over deflation anyway:

At this point in the postbubble transition to deflation, fiscal rectitude and monetary stringency are a dangerous policy combination, as appealing as they may be to the virtuous instincts of policymakers faced with a surfeit of sovereign debt. The result of Europe’s embrace of fiscal rectitude will be — paradoxically in the eyes of some — to export deflation to the United States, Asia, and the emerging markets.

….The link between volatile financial conditions and the real economy has been powerfully underscored by the events since mid-2007. Growth has suffered and subsequently recovered given powerful monetary and fiscal stimulus. And yet, the damaged financial sector, unable to supply credit; a jump in the precautionary demand for cash; and a persistent overhang of global production capacity have combined to leave deflation pressure intact. The G20’s newfound embrace of fiscal stringency only adds to the extant deflation pressure.

No wonder no country wants a strong currency anymore, as attested to by Europe’s easy acceptance of a weaker euro. The acute phase of the financial crisis is over, but the chronic trend toward deflation that has followed it is not.

Italics mine. I think Makin believes that he’s only saying the same thing that Milton Friedman would say if he were still alive. Unfortunately, conservatives no longer seem to care what Milton Friedman might say. After all, there’s an election coming up. Haven’t you heard?

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Fact:

In-depth journalism that investigates the powerful takes real money and is so damn important right now.But it doesn’t take a Mother Jones investigation to know that billionaires and corporations will never fund the type of reporting (like they do politicians) we do that exists to help bring about change. Instead, our mission-driven journalism is made possible by people power, and has been for 46 years now since our founding as a non-profit.

In “TITLE TK” Monica Bauerlein writes about the perilous moment we’re in, and why it’s so important that we raise $325,000 by the time November’s midterms are decided so we can be ready to throw everything we have at the big issues facing the nation no matter what happens. Please help MoJo’s people-powered journalism with a donation today.

$400,000 to go!

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