Deflation 'Death Star' firing lasers at economy

Deflation isn't just about football
Deflation isn't just about football

Prices are falling, that's a good thing right?

Wrong. Deflation is as scary as Darth Vader, at least according to SkyBridge Capital's Anthony Scaramucci.

The hedge fund manager used the Star Wars metaphor at the World Economic Forum to ram home his point about the hidden dangers of a deflationary spiral.

Scaramucci, affectionately called The Mooch, said the average person does not understand the terrible consequences falling prices can have.

Over time, they can encourage people to postpone purchases in the hope of buying cheaper in the future, sapping demand from the economy. That can turn into a vicious circle.

Related: Complete coverage of Davos

"It's an annihilation. It's Darth Vader, [the] Death Star outside of the atmosphere of the Earth, shooting lasers to blow up the world's economy," he said.

"Erm, that's kind of dramatic," responded Harvard economic professor Ken Rogoff, trying to calm things down.

darth vader world economy

But his words were hard to hear over the delighted laughter of the Davos audience.

Japan spent the best part of 20 years trying to shake off deflation and economic stagnation.

Inflation has turned negative in Europe, and most experts believe the European Central Bank will unveil a program of quantitative easing Thursday to try to turn the tide.

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