From Putin’s hordes massing over the eastern borders of Ukraine to
the army of home-grown Islamic State fanatics threatening a murderous
return from the Middle East, Europe has a lot be frightened of right now.
Yet there’s another nightmare haunting Europe’s economic policy makers: a monster called deflation that’s already clawing at the continent’s financial fundaments.
“We are meeting here at the time when Europe is facing a great threat,” Polish Finance Minister Mateusz Szczurek warned in a recent speech. “We are on the verge of deflation,” he told a Sept. 4 conference in Brussels. “As Europeans we should never forget that it was depression and deflation … that brought to power the totalitarian regime that devastated our continent through the world war and unspeakable atrocities 75 years ago.”
At first glance deflation doesn’t sound so bad.
Prices go down, what’s not to like?
Yet the cold economic reality means that when prices fall people stop spending, hoping things will get even cheaper. In response, businesses cut production and lay off workers. That means even less demand, and prices drop further.
By then, your economy’s in a vicious downward spiral.
Making things worse, those falling prices bring declining wages and worsening debt burdens.
Anybody who doubts how bad it could get should look back to the last time the United States caught a serious dose of deflation, from 1929-33. They called that the Great Depression.
Why Europe is terrified of deflation - Salon.com
Yet there’s another nightmare haunting Europe’s economic policy makers: a monster called deflation that’s already clawing at the continent’s financial fundaments.
“We are meeting here at the time when Europe is facing a great threat,” Polish Finance Minister Mateusz Szczurek warned in a recent speech. “We are on the verge of deflation,” he told a Sept. 4 conference in Brussels. “As Europeans we should never forget that it was depression and deflation … that brought to power the totalitarian regime that devastated our continent through the world war and unspeakable atrocities 75 years ago.”
At first glance deflation doesn’t sound so bad.
“Anybody who doubts how bad it could get should look back to the last time the US caught a serious dose of deflation. They called that the Great Depression.”
Yet the cold economic reality means that when prices fall people stop spending, hoping things will get even cheaper. In response, businesses cut production and lay off workers. That means even less demand, and prices drop further.
By then, your economy’s in a vicious downward spiral.
Making things worse, those falling prices bring declining wages and worsening debt burdens.
Anybody who doubts how bad it could get should look back to the last time the United States caught a serious dose of deflation, from 1929-33. They called that the Great Depression.
Why Europe is terrified of deflation - Salon.com
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