This is an excellent blog from the Economist. Check it out!
This article explains Germany’s fear of inflation in very easy terms. The concept is not new. Scholars call it ordoliberalism. This is the German version of neoliberalism superimposed with fears about inflation.
Of course, this is only half the story. The second half is about the German government not telling the German people the truth, and helping German business to benefit at the expense of the rest of Europe. See Wren-Lewis for an expansion of this argument or or Krugman on the Fall of France.
Yesterday, Eurostat announced that Euro area annual inflation was down to 0.3% in August. It added that Euro area flash inflation for Services was 1.2% – other goods 0.3%, with Food at -0.3% and Energy at -2.0%.
If we add the impact of sanctions on Russia and Russia’s sanctions on Europe, the trend is into deep recession.
So how should the World convince Angela Merkel‘s government to urgently support reflation across the Euro area? In my mind, we need to look to the fear of inflation and convince German people that that the fear of deflation is much more serious than inflation. It is time for the mainstream media and the social media to convince German people that their deepest fear is really about deflation not inflation! Certainly, Paul Krugman is now focused on what he describes as “Germany’s sin” but that’s another blog…