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That entrenched deflation.
History argues that, once entrenched, deflation does a lot more damage than inflation, and is also far harder to defeat.
Entrenched deflation does the opposite, and would create problems not just for Greece, but also for other countries with a high debt-to-GDP ratio.
TOKYO — Taro Aso, the newly appointed finance minister of Japan, said Friday that he wants the government to firm up its position on an accord with the central bank on an inflation target in January, before the bank's next policy meeting, to attack the country's entrenched deflation.
However, he cautions that "a country like the UK with relatively high levels of private and public debt needs to be on guard over entrenched deflation, which could easily push up the effective cost of servicing that debt".
Yet the Bank is no longer engaging in QE because the economy is now growing and it doesn't see a risk of entrenched deflation.
Similar(47)
That dashed inflationary expectations, and the economy remained entrenched in deflation.
It may also entrench deflation.
As deflation became entrenched, consumers adjusted accordingly.
And deflation, once entrenched, is fiercely difficult to dislodge, as Japan has found.
However, if prices continue falling for a long period and deflation becomes entrenched, that can have an adverse effect on the economy as consumers continually hold off making purchases in the expectation of lower prices.
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