{"id":10752,"date":"2014-06-11T12:53:41","date_gmt":"2014-06-11T16:53:41","guid":{"rendered":"http:\/\/multiplier-effect.org\/?p=10752"},"modified":"2014-06-11T12:58:31","modified_gmt":"2014-06-11T16:58:31","slug":"why-draghis-new-measures-wont-solve-the-low-inflation-problem","status":"publish","type":"post","link":"https:\/\/blogs.bard.edu\/multiplier-effect\/why-draghis-new-measures-wont-solve-the-low-inflation-problem\/","title":{"rendered":"Why Draghi’s New Measures Won’t Solve the Low Inflation Problem"},"content":{"rendered":"

In yesterday’s Financial Times<\/em>, J\u00f6rg Bibow addressed Mario Draghi’s recent announcement that the ECB will take new steps\u00a0(including cutting its deposit\u00a0rate to -0.1 percent) in an attempt to deal with (or, one might argue, in an attempt to appear to deal with) the fact that inflation in the eurozone is too low, according to the ECB’s own alleged\u00a0target.<\/p>\n

For Bibow, the proposed measures are unlikely\u00a0to get the job done, and the same could be said, he\u00a0argues, for any last-ditch\u00a0attempt\u00a0at\u00a0quantitative easing (a prospect mentioned by Wolfgang M\u00fcnchau in his last column<\/a>). The problem is that it’s hard to characterize eurozone disinflation as some unforeseen bump in the road:<\/p>\n

The driving force behind the eurozone\u2019s disinflation process is wage repression \u2013 exercised to a brutal degree across the currency union. In fact, wage repression \u2013 joined by fiscal austerity \u2013 is the eurozone\u2019s official policy meant to resolve the euro crisis\u00a0…\u00a0With wages in \u00fcbercompetitive Germany creeping up at a mere 2 to 3 per cent annual rate, the rest are forced into near, if not outright, deflation to restore their lost competitiveness. …<\/p>\n

The ECB was late to diagnose the issue and super-late to act. But the real issue is that neither its recent move nor any imagined future quantitative easing will do anything to reverse deflationary wage trends any time soon \u2013 trends established by deliberate policy.<\/p><\/blockquote>\n

Read Bibow’s letter\u00a0here<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

In yesterday’s Financial Times, J\u00f6rg Bibow addressed Mario Draghi’s recent announcement that the ECB will take new steps\u00a0(including cutting its deposit\u00a0rate to -0.1 percent) in an attempt to deal with (or, one might argue, in an attempt to appear to deal with) the fact that inflation in the eurozone is too low, according to the […]<\/p>\n","protected":false},"author":202,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[857,904,121,31,39,322,75,903],"class_list":["post-10752","post","type-post","status-publish","format-standard","hentry","category-eurozone-crisis","tag-deflation","tag-disinflation","tag-ecb","tag-eurozone","tag-inflation","tag-mario-draghi","tag-quantitative-easing","tag-wage-repression"],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/posts\/10752","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/users\/202"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/comments?post=10752"}],"version-history":[{"count":17,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/posts\/10752\/revisions"}],"predecessor-version":[{"id":10776,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/posts\/10752\/revisions\/10776"}],"wp:attachment":[{"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/media?parent=10752"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/categories?post=10752"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/tags?post=10752"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}