Will Europe See More Deflation, Stagflation, or Inflation?

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QUESTION:  Dear Martin, am a loyal reader of your blog and many thanks to you for the education. Please, one brief but important question, which keeps me thinking hard these days. I remember your words, inflation should pick up in the next cycle. But, isn’t it the other way round? Isn’t deflation the next thing.

We see inflation everywhere, in all asset classes, home prices, and durable goods. But if the economy declines and the people have no longer so many funds to pay their debt interest rates hey go defensive. And if the stock market declines too, sentiment turns and people become even more defensive. Isn’t this the classic scenario of a deflation period?
Thanks from Europe

ANSWER: I realize that on one hand, it may appear to be asset inflation in Europe, but you must look at the real numbers and then plot them in FOREX. We can see that when we look at the DAX in price, the bounce in US dollars has been less than in euros. In real terms, Europe has been in DEFLATION but capital has been shifting into the property market to escape the banking sector. It appears that the low in real terms for Europe may come in 2023. However, the type of inflation we see is cost-push, not demand. So you might call this STAGFLATION, as was the case during the 1970s following the OPEC crisis.