Deflation or Inflation? That is the query from folks now

Washington Post, June 8, 2009 on page A15:

"Psychology matters." Well,it is the perception and reception as I would envision.

Allan Meltzer of Carnegie Mellon University: "With huge budget deficits,the White House and Congress will want to hold down borrowing costs. Inflation psychology will emerge."

Paul Krugman, Princeton Economist,Columnist for New York Times: Deflation, not inflation, is the clear and present danger. He retorts. Deflation,not inflation.

Well,the simple way is to understand basic Keynesian Model of Aggregate Demand and Aggregate Supply to be intersecting i.e. Keynesian Cross. Recessionary or contractionary gap is bound to occcur or Inflationary or expansionary gap comes along. That is to be known from future empirical evidence.

Both economists are making assumptions from their own scenarios.

Francis Shieh aka Xie Shihao,a student of economics since 1943 and still a student as an octogenarian today."Maozhi zhi nian" in Pin Yin system of romanization.

On the same page,Henry Kissinger published an excellent article entitled "Reining in Pyongyang" Such is also a part and parcel of Sino-American Economics.

"America can't achieve a solution to the nuclear problem on its own. A sensitive, thoughtful dialogue with China, rather than peremptory demands,is essential." I do agree with Dr. Kissinger who was a Consultant at the RAND Corporation in 1964-65 when I was a member of the research staff,Department of Economics. Well,that is history but I fully agree with Kissinger's analysis. For details,please read the full text published in the Washington Post today.

Monday,June 8, 2009 at 4.16 p.m.