EU Deflation Arrives and the Troika Continues to Fiddle While the EU Burns

[Jefferson23]

Posted on January 8, 2015

By William K. Black


The troika (the EU Commission, the ECB, and the IMF) are flirting with throwing the entire eurozone back into a third Great Recession and much of the periphery into the continuation of the Troika Depression. For nations like Greece, the current Great Depression is now more severe and longer lasting than the Great Depression of the 1930s. The New York Times and the Wall Street Journal’s journalistic malpractice in covering the troika’s gratuitous infliction of misery upon the people of Europe has been the perfect side dish to complement the troika’s toxic economic malpractice.

Both papers are aflutter today with news that the Eurozone fell into deflation. We have been trying for months to explain that there is nothing magic about the harm caused by deflation (as opposed to very low levels of inflation). We have also been trying to explain for years that the steadily declining rate of (already inadequate) eurozone inflation is most important as a symptom rather than a cause of the harm resulting from the troika’s infliction of austerity.

The key fact to understand, which the troika, the WSJ, and the NYT have obscured for six years, is that if inflation were to rise from one percent to four percent in the course of a recovery from a recession that would be excellent economic news because it would spur growth. If inflation were to fall from one percent to one-half percent that would be terrible economic news. Well before the inflation rate becomes negative (deflation), material falls in the (already too low) inflation rate indicate that demand is seriously inadequate and that the economic recovery can be improved by fiscal stimulus. The fall in inflation is one of the symptoms that the demand is inadequate. The fall in inflation is also a problem – long before deflation – because it can further weaken the already inadequate demand for goods and services.

in full: http://neweconomicperspectives.org/2015/01/eu-deflation-arrives-troika-continues-fiddle-eu-burns.html

[bemildred]

1. They always double down. The banks must be paid. nt

[Jefferson23]

2. Yep, exactly. n/t

[quadrature]

3. the problem is Germany

Germany exports too much

[bemildred]

4. Germans open to Greek exit: poll

A majority of Germans wants Greece to exit the euro if the country doesn't comply with the austerity measures agreed upon with international creditors, according to a poll.

German public broadcaster ARD on late Thursday said a poll found 61 per cent of respondents want Greece to leave the single currency if it doesn't cut public expenditure as agreed with the European Union, European Central Bank and International Monetary Fund in exchange for financial aid.

The poll also found that citizens of Europe's largest economy oppose concessions ahead of a decisive election. Greece is set to vote on a new parliament later this month and the anti-austerity Syriza party, which opposes the country's financial bailout and economic reforms, is leading in opinion polls.

A Greek exit from the euro would be "much less dramatic for the rest of Europe than a few years ago," said 53 per cent of the polled Germans. The survey was conducted on Monday and Tuesday among 1,006 Germans aged 18 and above.

http://www.businessspectator.com.au/news/2015/1/9/international-news/germans-open-greek-exit-poll

[Jefferson23]

5. Thanks. n/t

[bemildred]

6. Always a pleasure.

It's getting hard to keep up with the all the disasters and catastrophes, but we have to try ...

[Jefferson23]

7. So true.

Wishing you and yours a wonderful New Year, bemilidred.

[Jefferson23]

8. Joseph Stiglitz, weighs in too: snip* The issue is not Greece. It is Europe.

If Europe does not change its ways – if it does not reform the eurozone and repeal austerity – a popular backlash will become inevitable. Greece may stay the course this time. But this economic madness cannot continue forever. Democracy will not permit it. But how much more pain will Europe have to endure before reason is restored?


Read more at http://www.project-syndicate.org/commentary/european-union-austerity-backlash-by-joseph-e--stiglitz-2015-01#UEzlUTgcOc1zMDms.99