I think inflation has been low for so long for several reasons -
* Globalisation forces kept prices low , domestic companies need to keep prices low to compete effectively because consumers have easier access to cheaper external suppliers
* Purchasing power is waning because of high household debt; so even lowering the interest rate cannot be as effective as before because households use the interest save to pay down debt instead of spending
* Confidence is so important for the economy and right now it is low and when confidence is low, consumer and business spending will be low, capital investment will get lower and no help from POTUS, Brexit , driving an ever lower velocity of money (money not changing hands as much , so people squirrel away the tax cuts they receive rather than spending it)
* Technological advances created lower cost solutions
* Demography changes- as baby boomers (with the money) retire, they spend less, that means with more retirees making up a large % of population, the rate of spending slows keeping in check price inflation (just like what is happening in Japan)
If you look at each of the above and the combined effects of them, you wonder how effective will monetary and fiscal policy be in helping shoring up the economy , and it is for those reasons I think we will be in sub-par economy for a rather long time even if we can avoid a recession (or a depression).
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