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The Beauty Of Deflation

By Claudio Grass

Deflation Paranoia

The euro zone’s consumer price inflation rate declined below 1% in early 2014, getting closer to zero during 2014, nowhere near the ambitious 2% benchmark set by central banks. A further small downward adjustment in the inflation rate has put it into negative territory, so harmonized euro area consumer prices are now declining. Western monetary authorities and economists appear genuinely fearful of deflation. Headlines in leading papers reflect this fear very strongly, describing deflation as “the world’s biggest economic problem”, or a “nightmare that stalks Europe” that could lead to its “demise and…