Bibow on Deflation and ECB Measures: “Beware What You Wish For”

Michael Stephens | March 6, 2014

From Jörg Bibow’s recent letter in the Financial Times, reacting to an article by Wolfgang Münchau on deflation and ECB policy:

What is really new today is that wages are becoming unanchored and hence cease to provide the safety net that asymmetric central bankers habitually rely on. This is the consequence of the collective effort to restore competitiveness practised across the eurozone. Deflationary structural reforms of labour markets can only amplify this futile and hazardous process. But with the ECB applauding these efforts as the supposed panacea to the eurozone’s ills, what kind of miracle weapon can we expect the bank to deploy to halt the resulting plight?

Read the rest here.

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