Inflation is crumbling across Europe. In fact, in several countries, it’s already negative. Economists are increasingly worried that the whole continent is going to drop into deflation.
Most people don’t know what deflation means. We’re familiar with its opposite, inflation. That’s the condition in which prices keep rising, the value of money keeps falling, and people end up having to pay huge sums for small amounts of goods — as they are in Venezuela right now.
For most people, deflation will be a scary and rare kind of economic meltdown. And it can be far more difficult to fix than inflation. It means that prices will start to fall. While that sounds great — everything is getting cheaper! — it’s actually a disaster because in deflation no one wants to buy anything, demand plummets, and economic growth grinds to a halt, bringing employment with it.
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