The Eurozone is now in deflation
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  The Eurozone is now in deflation
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Author Topic: The Eurozone is now in deflation  (Read 3706 times)
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Icefire9
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« on: January 07, 2015, 10:12:05 AM »

http://www.bbc.com/news/business-30707644

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RR1997
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« Reply #1 on: January 07, 2015, 10:46:49 AM »
« Edited: January 07, 2015, 10:49:05 AM by RR1997 »

Terrible news. Deflation is worse than inflation.

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Antonio the Sixth
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« Reply #2 on: January 07, 2015, 12:46:22 PM »

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Franzl
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« Reply #3 on: January 07, 2015, 12:51:34 PM »

Ignoring the role of low energy prices (which the article mentions) isn't particularly honest.
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CrabCake
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« Reply #4 on: January 07, 2015, 01:16:10 PM »

OK, this may sound really dumb; but can't deflation be solved instantly by just printing more money?
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traininthedistance
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« Reply #5 on: January 07, 2015, 01:32:24 PM »

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Oakvale
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« Reply #6 on: January 07, 2015, 01:56:09 PM »


Is this a joke? It says unfortunate things about the decline of this board that I can't assume so.
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Landslide Lyndon
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« Reply #7 on: January 07, 2015, 03:01:36 PM »

OK, this may sound really dumb; but can't deflation be solved instantly by just printing more money?

Good luck selling that to Merkel. Germans are paranoid when it comes to inflation.
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Lief 🗽
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« Reply #8 on: January 07, 2015, 07:27:30 PM »

Thank you President Obama from saving us from this deflationary austerity-induced hell.
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RR1997
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« Reply #9 on: January 07, 2015, 07:59:53 PM »

Thank you President Obama from saving us from this deflationary austerity-induced hell.
^^

I maybe betraying my fellow right-wingers by saying this, but Lief is absolutely correct.
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Franzl
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« Reply #10 on: January 08, 2015, 07:03:04 AM »

Ignoring the role of low energy prices (which the article mentions) isn't particularly honest.
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Landslide Lyndon
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« Reply #11 on: January 08, 2015, 08:01:22 AM »

Ignoring the role of low energy prices (which the article mentions) isn't particularly honest.

Eurozone was sliding to deflation long before the collapse of oil prices.
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Democratic Hawk
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« Reply #12 on: January 29, 2015, 07:14:07 PM »

Deflation has arrived in Germany: Inflation rate falls to -0.5 per cent in January

http://www.cityam.com/208256/deflation-has-arrived-germany-inflation-rate-falls-03-cent-january?utm_source=dlvr.it&utm_medium=twitter


Germany has slipped into deflation for the first time since the global financial crisis, supporting the European Central bank's recent decision to unleash its biggest "bazooka" on the ailing Eurozone.

Consumer prices fell -0.5 per cent on an annual basis in January, according to flash estimates from Germany's statistics office. This meant they had fallen to the lowest level since July 2009.

This shows that, despite its sunnier outlook, even the Eurozone's "star economy" is enable to inoculate itself against the spectre of prolong deflation which is currently haunting the single-currency bloc.


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True Federalist (진정한 연방 주의자)
Ernest
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« Reply #13 on: January 30, 2015, 11:35:50 AM »

Humorous cartoon on the subject: "And the Americans are just worried about football deflation"
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Ban my account ffs!
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« Reply #14 on: January 30, 2015, 06:11:28 PM »

Is this all because of internal Devaluation in the periphery?  Germany is trading with economies where adjustment has lowered demand so German prices fall to reflect that?  Also there are few non-innovation related opportunities in the domestic market...the population is shrinking.
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Foucaulf
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« Reply #15 on: January 31, 2015, 02:54:25 AM »

OK, this may sound really dumb; but can't deflation be solved instantly by just printing more money?

There is a very simple answer to this question: people and banks can choose to save the money printed instead of spending it on goods or investment projects, so prices don't increase anywhere due to significant demand shifts. No need to write 800-900 words about it.

If the secular stagnation hypothesis is true, though, then deflation isn't even the biggest problem anymore. The culprits are the usual ones: aging workforce, labour market adjustment failures, etc. The consequence is that banks don't see any projects as profitable enough (the expected interest rate on these loans outpace inflation, so the real interest rate is negative).
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Gustaf
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« Reply #16 on: February 08, 2015, 09:23:39 AM »

It's not Merkel's fault that the ECB was setup with an idiotic inflation target.
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Indy Texas
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« Reply #17 on: February 08, 2015, 02:36:39 PM »

OK, this may sound really dumb; but can't deflation be solved instantly by just printing more money?

There is a very simple answer to this question: people and banks can choose to save the money printed instead of spending it on goods or investment projects, so prices don't increase anywhere due to significant demand shifts. No need to write 800-900 words about it.

If the secular stagnation hypothesis is true, though, then deflation isn't even the biggest problem anymore. The culprits are the usual ones: aging workforce, labour market adjustment failures, etc. The consequence is that banks don't see any projects as profitable enough (the expected interest rate on these loans outpace inflation, so the real interest rate is negative).

This. The money has to actually come off the bank balance sheets and move around in the economy purchasing goods and services to have any impact. And as someone already mentioned, once prices have begun to fall, it is very hard to make that happen.

People aren't going to go out and buy a new car that they know will be cheaper a month from now. But they're scared and will keep their money in banks and fixed income assets even when interest rates get so low that they're paying for the privilege of doing so. (That's what's happening in Europe right now.)

That is one of those situations where governments have to use the fiscal policy route and actually start spending some money of their own accord. Monetary policy by itself isn't going to be enough - it's too late for that at this point.
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