Good post by Bill Black on EZ deflation in which is excoriates the usual. I would just add that price level is not an observable but rather an estimate, and estimating is a slippery affair. Central banks try to err on the high side rather than fall into the deflation trap. When a currency zone officially falls into deflation, the government has drastically missed the mark and failed to use its available tools properly. As Bill notes, deflation doesn't just happen. It happens over time through a period of disinflation. This has been obvious in the EZ, especially through its effects on the periphery. Moreover, sanctions on Russia have further reduced demand for European produced goods and services, which is a double whammy on top of ill-advsed austerity. This is dangerous not only socio-economically, but also politically. Instability is increasing.
New Economic Perspectives
EU Deflation Arrives and the Troika Continues to Fiddle While the EU BurnsWilliam K. Black | Associate Professor of Economics and Law, UMKC
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