If you could ask the world’s top central bankers what really terrifies them, I think the honest answer would usually be “deflation.” It is their greatest nightmare. They think a little inflation is good (thus the 2%+ target), and they’re confident they can subdue it if necessary. Deflation is a bigger problem. Let’s note, however, that these aren’t either/or conditions. They have degrees of severity. Indeed, the last four decades we’ve seen disinflation—a mild form of deflation—in many segments of the economy. Compared to that, even relatively mild inflation looks quite concerning. And many smart people are concerned, as I described in last week’s review of SIC inflation talk. Read more.