Bangkok--11 Aug--Standard & Poor's
When U.S. government deficit spending began mounting to record levels this year to stimulate the economy out of a deepening recession, some raised the specter that the dark days of double-digit inflation might soon return. But according to a new report published today by Standard & Poor's Ratings Services titled "Why America's Rising Debt Doesn't Necessarily Mean Inflation Is About To Explode," the causes of inflation are more complex than that.
"People are looking at monetary indicators and the big increase in government debt, and saying it could presage inflation," said Standard & Poor's Chief Economist David Wyss. "That's not necessarily the case." A good example to the contrary, he explained, is when the Bank of Japan printed money in the 1990s to cover mushrooming Japanese government debt. Despite the flood of liquidity Japan's central bank unleashed, prices in Japan have pretty much gone done down for the last 15 years. "So these simplistic arguments that there's necessarily going to be inflation because of government debt are simply not the case. If you look at the history, the link is not as clear as people might think."
Mr. Wyss says that, in his opinion, inflation won't be a major factor in the U.S. for perhaps another five years—after the economy has fully rebounded.
The report is available to RatingsDirect subscribers at www.ratingsdirect.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-9823 or sending an e-mail to [email protected]. Ratings information can also be found on Standard & Poor s public Web site at www.standardandpoors.com; under Ratings in the left navigation bar, select Find a Rating. Members of the media may request a copy of this report by contacting the media representative provided.
Media Contact:
Mimi Barker, New York (1) 212.438.5054, [email protected]
Analyst Contacts:
David Wyss, New York (1) 212-438-4952
Key Contacts:
Americas Media Relations: (1) 212-438-6667
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Americas Customer Service: (1) 212-438-7280
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