US and Britain 'can inflate their way out of recession'

12 April 2012

Inflation is likely to be vital to the way in which the US and Britain recover from the economic downturn.

That is according to Philip Coggan, a columnist for Buttonwood and The Economist's capital markets editor, who feels it will take "five to ten years" for the global financial system to recuperate, with different nations following a variety of routes to resolve their own issues.

Speaking to the Cambridge Judge Business School podcast, Mr Coggan explained that struggling countries have three realistic options when it comes to returning to health, with these being "inflate, stagnate and default".

He went on to say that while the likes of Greece will default on debts, the US and Britain are able to inflate their way out of trouble because they can issue debt in dollars and sterling by printing more money.

Meanwhile, Mr Coggan cited Japan as an example of a country taking the stagnation option, as it holds the "key advantage" of owing cash to its own citizens.

By Asim Shah

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