“Deflation is a bigger threat than inflation,” concludes the headline for an excellent piece by economist Gavyn Davies in the Financial Times. Perhaps. But there should be two parts to an assessment of threats like this. First, estimate the probability of the event (e.g., deflation), and then estimate the consequences. Davies makes a great start on the probability part. His argument would be even stronger had he also noted that the consequences associated with deflation are likely to be (far) worse than inflation because governments lack the tools to fix the problem.