Let me say it again – the euro zone is heading for deflation

Ambrose Evans-Pritchard at the Telegraph quotes me on the risk of deflation in the euro zone:

Lars Christensen from Danske Bank said the EU authorities are repeating mistakes made in Japan in the early 1990s when deflation became lodged in the system. “Several eurozone countries are already in outright deflation, and that is making it even harder to deal with banking problems and the debt trajectory. There is no growth in the money supply, so this is going to get worse, not better.

“This is just like Japan. The central bank thought money was easy when in fact it was much too tight. But effects could be much worse in Europe because unemployment is so much higher.”

And yes I said it many times before – just see herehere and here.

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3 Comments

  1. luca

     /  November 6, 2013

    monetary socialism will not save euro and european union

    Reply
  2. Lars: Could one perceive a crash as a way to clean out the system and thereby create better perspective for going forward?

    In other words, that ‘getting worse’ might be good for a short while?

    Reply
  3. Benjamin Cole

     /  November 9, 2013

    Egads, deflation. Japan, we love you.

    Reply

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