Government Fears Inflation, Not Deflation

Management planning for a  deflationary recession are going to be caught by surprise.  In spite of the significant press attention to lower consumer prices, the Federal Government is taking actions that indicate a fear of a different kind.  The U.S. is seeking $300 Billion in hard cash from the Gulf States' sovereign funds, indicating that there is a distinct lack of belief in the power of domestic fiscal stimulus and monetary policy to solve the present crisis.  There is, instead, a fear that such attempts will lead to inflation, or else they would not bother seeking the funds and sacrificing the political capital elsewhere.

The strategies for dealing with an inflationary recession and a deflationary one are very different, and enterprising managers need to be prepared.