"Nowhere is this cycle more evident than in Spain. Last month, it became the first of the 16 nations that use the euro to record a negative inflation rate. The drop, though just 0.1 percent, had not happened since the government began tracking inflation in 1961, and Spanish officials have said prices could keep dropping through the summer. " A drop of 0.1 percent is a "Deflation Death Spiral" ? ¡Ay, caramba!
As far as I can tell, anything less than 2% inflation is a "Deflation Death Spiral". Fear of the deflation bogeyman is reaching absurd levels. Of course, this fear is what allows governments to inflate with impunity.
Yep. The euro introduces massive distortions, the effect of which you can best see by looking at the effect it had on the periphery of the eurozone, especially Ireland and Spain. Their troubles will only begin to subside when they ditch the euro, not before.
This is a fair point. The title should read fear of a impending death spiral. However, I would argue that deflation has been grossly understated to date, even here in the U.S. My liquidity has much more purchasing power than it did two years ago, whether I want to buy a house or a car. Nonetheless, this inflation versus deflation topic, not just as it relates to Spain but to the entire globe, is a worthy one warranting careful attention in the months to follow.