Deflation emerged as a distinct threat to Europe’s tentative economic recovery earlier this year and since then conditions have deteriorated further. Europe stands on the precipice of a triple-dip recession and at this point it appears unlikely that rates will rise in the euro zone for at least another five years.
But why is deflation such a threat? And should households and businesses really be worried?
It’s a fair question, and one that deserves to be fleshed out further. Surely declining prices are a good thing, right?