July 7, 2014
Europe is enjoying a level of price stability and low interest rates rarely seen since the end of World War II.
Wages, pensions, rents etc. do not require permanent adjustments to rising prices, an advantage we are not fully appreciating.
Citizens are no longer deceived by monetary illusions. The Euro has lost very little of its value during the past 10 years. Citizens can therefore keep their savings in liquidity without being afraid of a hidden depreciation, while house owners should no longer be deceived by inflationary rises in value.
The only ones not content with price stability are those who benefit from inflation, like heavily indebted governments and companies which see the relative weight of their debt shrink when prices rise, though they too benefit from price stability because of the low interest rates that go along with.
So why are the ECB and most monetary economists so afraid of low inflation? Why […]