In the near term, it’s clear that the world is deflationary says Longview Economics senior market strategist Harry Colvin. After all, he says, inflation readings are sharply lower; money velocity is contracting; the oil price is weak; and the economy has turned down sharply creating an increasingly large output gap. All of that speaks to a theme which Colvin calls ‘The Reckoning’, which should be a deflationary force on the US and global economy at least for the next 6 – 24 months. Beyond that timeframe, though, there is a contentious debate around whether inflation will meaningfully reaccelerate in the next economic cycle, he says. The ‘deflationists’ suggest that this crisis will leave the US and global economy with even more debt and zombie businesses, according to Colvin. They also, he says, highlight the lack of inflation post the GFC – despite large levels of money creation and initial fiscal easing. The evidence suggests it will be different this time, however, argues Colvin, with the two key ingredients for high and rising inflation over the medium term – large levels of money stock and rising money velocity -now in place.