Ambrose Evans-Pritchard appears to be one of the few individuals still worried about deflation. In this story at the Telegraph today, he reflects on what central banks have done over the last couple years and where we might all go from here now that a couple trillion dollars has been loosed on the system, created out of thin air in support of the cause.

We will never know whether it was wise to go nuclear. My view – anathema to readers, I fear – is that Ben Bernanke and Britain’s Mervyn King saved us from potential calamity. We were all too close to the tipping point illustrated in Irving Fisher’s Debt Deflation Causes of Great Depressions, the moment when the sailing ship catches water and capsizes instead of righting itself by natural rhythm.
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Robert Hetzel, chief economist at the Richmond Fed, writes in Monetary Policy In The 2008-2009 Recession that central banks themselves triggered the crisis by failing to cut rates fast enough as the economy tanked from March to July 2008.Cast your mind back to that moment. Rates had already been slashed from 5.25pc to 2pc. Oil and copper prices were rocketing. Inflacionistas were screaming, accusing the Fed of 1970s debauchery and some Fed hawks seemed to agree.

Dr Hetzel said the Fed “effectively tightened” policy in June 2008 by tough talk that led the futures market to price in a half-point rate rise by September 2008. Evidence that the growth rate of broad money had long been plummeting was ignored.

The European Central Bank went further, raising rates in July even though the eurozone was already deep in recession. We know what happened. Lehman, AIG, Fannie and Freddie fell apart in September. The wheels came off the world’s financial system.

My fear is that the Fed will repeat the mistake – in this case by reversing QE too soon.

Oh please! Is that how this is going to be remembered by central bank historians? That the ECB raised short-term rates by a quarter point and Ben Bernanke “talked’ the financial system into collapsing?

As if, like in 1929, history begins in 2008 when things were peachy keen and a policy error is to blame for all that has happened since, rather than the alternative view – one that central banks don’t like to think about – that they allowed (and, in some cases, encouraged) the inflation of the biggest financial bubble in history that did what all bubbles do – pop!