Deflation as a Recipe for a Prosperous Europe
Journal for the New Europe, Vol. 1, No. 1, pp. 63-82, 2004
21 Pages Posted: 23 Sep 2008
In the following text we will analyze the problems stemming from incorrect definitions of inflation and deflation.Then we will put forth a taxonomy of deflation, which will enable us to abandon the confused "macro" view of the deflation issue and to show the flawed comparison between two evils: the smaller one - inflation, and the bigger one - deflation. The analysis will enable us to demonstrate the complete impossibility of justifying an "antideflationary" (i.e. inflationary) policy from an economic point of view, and to prove the thesis about the grave and disastrous consequences of state interventions in the field of money. Short case-studies will shed light upon the main monetary problems in the U.S. and Argentina, and it will also help to understand the necessity of a methodologically anchored, and therefore economically sound, analysis of the deflation problem.
Keywords: Inflation, deflation, bank credit, economic growth
JEL Classification: E31, E58
Suggested Citation: Suggested Citation