Sunday, April 20, 2014

Debt Deflation In Europe

Inflation in Europe is very low.  It is below the ECB target of 2% and it is negative in country's with high total debt (household plus government debt).  That is not good for households and governments with a high debt burden.  The debt must be repaid with more expensive euros.  Its a mystery to Paul Krugman.  He can't understand why low inflation is a priority in nations with a high debt burden.  It is not good for economic growth and economic growth is the best way to reduce debt.

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