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Yesterday I wrote a post about how we are inching closer and closer to outright deflation in Europe. However, for other countries the risk of deflation is not the issue. In Argentina and Venezuela outright hyperinflation is becoming more and more likely.
A man carries his newly purchased television outside an appliance store in Caracas, Venezuela, Monday, Nov. 11, 2013. President Nicolas Maduro seized control of a nationwide chain of appliance stores Friday seeking to battle inflation and shortages. Shoppers were still arriving Monday to join the hundreds who began amassing over the weekend after price inspectors said they found evidence of "usury" and Maduro ordered the chain Tiendas Daka "occupation." (AP Photo/Ariana Cubillos)
This week have brought even more confirmation that we are still basically in a deflationary world - particularly in Europe. Hence, inflation numbers for October in a number of European countries published this week confirm that that inflation is declining markedly and that we now very close to outright deflation in a number of countries. Just take the case of the Czech Republic where the so-called monetary policy relevant inflation dropped to 0.1% y/y in October or even worse Sweden where we now have outright deflation - Swedish consumer prices dropped by 0.1% in October compared to a year ago.
The readers of my blog will know that I am very supportive of the latest actions from the Czech central bank (CNB) to start to use the exchange rate as a policy instrument given the fact that interest rates effectively are stuck at the Zero Lower Bound.
Yesterday the global market focus not surprisingly mostly was on the ECB's surprise 25bp refi rate cut. However, from a monetary policy perspective something a lot more interesting happened in the Czech Republic. Hence, yesterday in connection with its monthly board meeting the Czech central bank (CNB) made the following statement:
Ambrose Evans-Pritchard at the Telegraph quotes me on the risk of deflation in the euro zone:
This is Michael Steen in the Financial Times:
If I ever had a real mentor I would have to say it was Otto Brøns-Petersen. Otto was my boss when I started working at the Danish Ministry of Economic Affairs in the Mid-1990s. Otto taught me a lot about economics, but he particularly taught me to understand the politics of economic policy making. Something that made me tremendously skeptical about the ability of policy makers to do the "right thing".
A couple of days ago I was playing pool with Mathias my 3-year old son (we are still on vacation). Or rather I was playing and he was telling me what balls to hit and where to pocket them.
I love reading the normally good blog posts on freebanking.org written by clever economists such as George Selgin and Kurt Schuler. However, the Facebook page of freebanking.org very often fails to live up to the same good standards as the blog. In fact most updates are what I consider to be internet-Austrian nonsense.