Today, Europe has been hit again by a massive deflationary shock.

Policy as a whole over the entire euro zone is too deflationary.

A remote scenario?

SEXUAL OBSESSION SCENARIO

The deflationary debt trap is threatening to destroy a still incomplete political union.

First, there was no automatic deflationary pressure following from some alleged peculiarity of the adjustment mechanism. The question of overall deflationary or inflationary impact depended (and still depends) on the total quantity of money.

THE REAL DEAL SCENARIO

ANOTHER SCENARIO WORTH CONSIDERING

Following the 1929 stock market crash, Europe was hit by a massive deflationary shock.

Neither scenario is very likely.

CAMBRIDGE Consider the following scenario.

This is the rosy scenario.

There is no alternative scenario.

With China retaining its under valued currency policy, dollar depreciation can aggravate global deflationary forces.

Deflationary pressures eased in Japan but firm evidence that deflation has ended is still awaited.

One major concern relates to the destabilizing and deflationary feedbacks among trade, debt and finance.

But this scenario failed to materialize.

Such a scenario is not impossible.

This is no mere rosy scenario.

Another negative scenario is military rule.

One popular scenario is chronic inflation.

Let s call the first scenario Scramble .

First, there was no automatic deflationary pressure following from some alleged peculiarity of the adjustment mechanism.

It simply reflects the recessionary (or deflationary) force of weak global demand hanging over the world economy.

The way out of a deflationary trap is to first induce inflation and then to reduce it.

And this is just the baseline scenario.

This should not be an impossible scenario.

And this is the best case scenario.

Thus, Egypt is reenacting the Algerian scenario.

Fortunately, this is a remote scenario today.

The 450 scenario presents an immense challenge.

But that halcyon scenario looks increasingly improbable.

The last scenario came from William himself.

There are concrete examples of this scenario.

That is the scenario at the moment.

Abe is right about one thing Japan needs to get out of its no growth and deflationary trap.

Thus, deflationary pressure will to some extent result in downward quantity adjustments, which will deepen the real crisis.

The question of overall deflationary or inflationary impact depended (and still depends) on the total quantity of money.

As such, the PBoC will need to maintain counter cyclical policies in order to avoid a deflationary spiral.

Further falls in commodity prices already down 30 from their summer peak will add to these deflationary pressures.

In these circumstances, domestic deflationary policies will only further slow growth and are helpless to stem imported inflation.

The principle behind this is that collective insurance would be cheaper, and therefore less deflationary, than self insurance.

Abe is right about one thing Japan needs to get out of its no growth and deflationary trap.

Unfortunately, that scenario now seems to be unfolding.

But this scenario is neither relevant nor desirable.