EU Deflation Doesn’t Have To Be A Disaster

Now that Europe is officially in deflation, most analysts think that a round of QE from the European Central Bank is almost inevitable, despite German objections. But no matter what the ECB decides later this month, deflation won’t necessarily be the economic catastrophe that some investors fear, and Source head of research Paul Jackson argues that there could be a silver lining.

“From an arithmetic point of view, the Eurozone may be experiencing deflation. However, both theory and practice suggest this does not have to spell disaster,” writes Jackson with Source research assistant Andras Vig. “Falling oil prices and a weakening currency could help the Eurozone rise from the ashes of despair. Wouldn’t that be a surprise?”