New York Times' Floyd Norris writes,
``Making Greece’s exporters competitive will be a very difficult task while the country remains in the euro zone. If it does, the likelihood is that there will be a prolonged period of deflation, with wages being reduced in an effort to cut costs." (bold highlights mine)
The mainstream impression is that because Greece is stuck with the rigidities of having a monetary system anchored on the Euro, where devaluation isn't an option, the attendant adjustments to the current debt problems intuitively leads to deflation.
But how true is this perception?
Greece has indeed been suffering from recession throughout most of 2009 until the present as shown in the above annual and quarterly charts from tradingeconomics.com.
Yet the inflation index registers a hefty jump (annual basis)!
In addition, during the depth of the global crisis, Greece's inflation index shows that consumer prices had NOT fallen below zero or to the negative levels! So even if we stick by the mainstream's definition of deflation- of falling consumer prices and not shrinking money supply- deflation has been non-existent in Greece!
And the index has even yet to account for the recent massive bailout.
Bottom line: the mainstream perception, premised on the dominant economic ideology, of how the world operates seems far far far away from reality.
Before I forget, let me add that Greece seems to be suffering from 'stagflation' or a period of slow economic growth, high unemployment and rising prices, a scenario which mainstream has blatantly overlooked in the past (1970s) and seemingly appears to be the same source of vulnerability today.
``Making Greece’s exporters competitive will be a very difficult task while the country remains in the euro zone. If it does, the likelihood is that there will be a prolonged period of deflation, with wages being reduced in an effort to cut costs." (bold highlights mine)
The mainstream impression is that because Greece is stuck with the rigidities of having a monetary system anchored on the Euro, where devaluation isn't an option, the attendant adjustments to the current debt problems intuitively leads to deflation.
But how true is this perception?
Greece has indeed been suffering from recession throughout most of 2009 until the present as shown in the above annual and quarterly charts from tradingeconomics.com.
Yet the inflation index registers a hefty jump (annual basis)!In addition, during the depth of the global crisis, Greece's inflation index shows that consumer prices had NOT fallen below zero or to the negative levels! So even if we stick by the mainstream's definition of deflation- of falling consumer prices and not shrinking money supply- deflation has been non-existent in Greece!
And the index has even yet to account for the recent massive bailout.
Bottom line: the mainstream perception, premised on the dominant economic ideology, of how the world operates seems far far far away from reality.
Before I forget, let me add that Greece seems to be suffering from 'stagflation' or a period of slow economic growth, high unemployment and rising prices, a scenario which mainstream has blatantly overlooked in the past (1970s) and seemingly appears to be the same source of vulnerability today.
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