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But that move would almost certainly lead to galloping deflation in both economies and a serious recession (and possibly a break-up) in Europe.
Over the same period, China's trade surplus narrowed to $26.3 billion and inflation rose to 1.3%, its highest for three years, after deflation in both 1998 and 1999.In this section EARLY CHILDHOOD ECONOMY FINANCIAL MARKETS Reprints.
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But if Germany is going to have only 1 percent inflation, we're talking about massive deflation in the periphery, which is both hard (probably impossible) as a macroeconomic proposition, and would greatly magnify the debt burden.
At the same time, the ECB is committed to very low inflation at the aggregate level, which means that real exchange rate adjustment must take place mainly through deflation in the GIPS, which is both very difficult and has the effect of raising their debt burden relative to GDP.
Fears of a plunge into deflation in Europe have eased somewhat, with both headline and core inflation now positive.
It fell into deflation in the late-1990s, with unpleasant but not apocalyptic consequences for both itself and the world economy.
Britain had long periods of "good" deflation in the late 18th and 19th centuries, when nominal interest rates and growth were both strong.
Fears over deflation in America deepened.
Deflation in Japan has also abated.
Effectively, we have a lot of deflation in the system.
It's the comedy of deflation in large amount.
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