The Dreaded D's: Deflation, Depression and the Dollar - Part 2
One of the key deflationary concerns for the current global economy is Europe’s dangerously low inflation rate. The inflation rate for the 18 countries that use the euro fell to an astonishing .3 percent in August, a five-year low and well under the 2% benchmark. Inflation for the Eurozone has been below 1% since October of last year.
Numbers like these will likely increase pressure on the European Central Bank to initiate an easy money policy to help stimulate economic growth. Central bankers are not fond of deflationary cycles since they are notoriously difficult to break, but rapid and prolonged deflation can not only lead to an economic recession but quickly deteriorate into a full blown economic depression.