NEW YORK TIMES: Consumer prices in the euro zone ticked ever closer to outright deflation, official data showed Tuesday, making it almost certain that the European Central Bank will move to ease monetary policy this week.
Inflation in the 18 nations that share the euro rose at an annual rate of just0.5 percent in May from a year earlier, down from a 0.7 percent rate in April, Eurostat, the statistical agency of the European Union reported from Luxembourg.
Deflation, spurred by falling wages and depressed consumer demand, hits borrowers by raising the real… (more)
EDITOR: We have discussed six years the need for moderate real inflation in order to spur investments and generate employment by reducing the burden of debt. Deflation increases debt burden.
One of the reasons for our slow recovery in the USA has been the lack of inflation. This can be traced back to the failure of Republicans to permit fiscal stimulus and, as a result, the need of the Federal Reserve to lend at almost zero interest rates to try to keep the economy moving ahead.
We pumped up the stock market but little else. Recent statistics suggests the nation is again in economic decline. How very sad.
May I add that Europe does not appear to be going on a stimulus spending bender either. Is it possible they failed to read Keynes?
EDITOR: The situations simply is not analogous to the USA. There is no “Europe” to go “on a stimulus spending bender.” There are well over a dozen individual countries with a variety of experiences.
The southern tier has been prevented from devaluating their currency because they are on the Euro. In the case of Greece, it’s fiscal policies are controlled by other nations through loan agreements.
The northern tier has been doing well, especially Germany. The disparity among economies is a major part of the Euro problem.