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Welcome to Deflationite

Welcome to deflationite. Over time I hope to document and comment about currently the biggest deflationary episode to effect the global economy since the great depression.

My name is Jamie Sanderson, I left University with an honours degree in economics and a preference for Post Keynesian economics. While it gave me a warm inner glow to not be churned out as one of the endless line of neoclassical sheep; being a heterodox economist made gaining employment in the private sector and public service nigh on impossible.

So after a couple of years in odd jobs I embarked on a PhD. Again, it was not the norm, it was about the economic effects of climate change, which was not a very popular subject back in 1996 when most of the public thought climate change was a change in wind direction.

Eventually the PhD was completed and a book published. Life then intervened in terms of family committments, but the interest in economics never waned. I am resigned to live the rest of my employed days as an academic economist unless the miracle of the fall of the neoclassical empire finally happens.

The current world financial crisis has been fascinating and I have been keeping a close watch as events have unfolded. No one can really predict what is going to happen. However, I am convinced that the world is going to go through a prolonged deflationary episode, lasting years, not months.

So what better fun for a heterodox economist with some time on his hands than to document the most significant economic event of our lifetime?

I hope you enjoy the information presented over the coming months and years.

October 13th, 2009 | Category: Welcome
  • dkong

    Hi Jamie,

    thanks for making this interesting blog. I found out about it from a post you made on Steve Keen’s blog.

    I was just wondering (and no I wont constitute this as financial advice), but in a deflationary scenario, is is best to be in a cash position?)

    Also, what do you think the likelihood is that the governments will be crazy enough to have another round of stimulus packages? I know there is not crystal ball, and a logical person would have probably been surprised that even the first round of stimulus packages were offered, but I was curious.

  • Jamie Sanderson

    Hi, welcome to the blog, I’m certainly not qualified to be giving financial advice, so a big grain of salt should be taken with the following comments.

    The question regarding cash in a deflationary scenario depends on individual positions. If you have substantial debt you will get a greater return on your money if you pay down debt (i.e. the interest saved on debt will be greater than that gained from cash or bonds). However, there are other individual scenarios where cash might outperform other investment classes in a deflationary period.

    The big question is cash going to be the best performer out of all investment options over a deflationary period?

    I would certainly say no to this. There will always be certain specialised asset or investment vehicles that will do well no matter how bad the macroeconomic situation. How to pick them is the difficulty.

    As with most things in life, moderation and diversity are the way to go. I’d suggest never getting into a position where one thing dominates as it gives that one thing the potential for greater impact (positive or negative).

    In terms of further government stimulus, very difficult question to answer though as so many different things can happen, it would be pure guesswork. But if I were to guess then there is certainly the desire and the capacity for many governments around the world to provide additional stimulus. Not that I agree with it, but the powers that be both in government and the private sector will be wanting more if things continue to deteriorate. Fighting debt with more debt will continue for a while at a guess.

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