Low inflation is already a serious obstacle to economic recovery and rebalancing within the eurozone. Outright deflation would be an even more dangerous threat.

And that's basically deflation 50 percent deflation.

The main lesson of the Asian financial crisis or, for that matter, of any financial crisis is that deflation is the ultimate threat to recovery. Because the 1997 crisis was confined to East Asia, China was able to escape deflation after it joined the World Trade Organization.

CAMBRIDGE The European Central Bank is moving, hesitantly but ineluctably, toward quantitative easing. The threat of deflation and the ineffectiveness of its previous measures leaves it no choice.

Deflation Doldrums?

Putting Deflation First

The Deflation Bogeyman

Deflation and Democracy

Inflation or Deflation?

Can China Beat Deflation?

Can China Avoid Deflation?

Southern Europe could enforce deflation.

Deflation in many advanced economies.

Has Global Stag Deflation Arrived?

That's a 50 percent deflation rate.

Why Deflation is Good News for Europe

TOKYO The eurozone is facing a bleak economic outlook, with growth remaining stagnant and the threat of deflation looming large. The economist Martin Feldstein, who was skeptical of the initiative from the start, now calls it a failure.

The most important component of Abenomics this year has been the BOJ s efforts to ease monetary conditions further, despite zero interest rates, and thus end the threat of deflation. Under these circumstances, inflation expectations are not a cause for concern.

Inflation and interest rates in Japan lately have been even lower than in the US. The most important component of Abenomics this year has been the BOJ s efforts to ease monetary conditions further, despite zero interest rates, and thus end the threat of deflation.

Notably, price growth turned positive last month, suggesting that the threat of deflation has been eliminated. This has prompted a modest uptick in expected inflation the ECB s favorite measure of price stability not for the immediate future, but in five years, and then for five years.

There is a further reason why deflation is such a threat, and why policymakers setting out to eliminate it have a much tougher task than inflation fighters all prices do not move down in particular debts do not adjust because they are fixed in nominal terms.

DIJON With all of the problems afflicting the world economy nowadays, inflation seems to be the least of our worries. In addressing the post 2008 economic malaise, which stems from over indebtedness, policymakers are correct to focus on the threat of debt deflation, which can lead to depression.

In terms of price performance, that's a 40 to 50 percent deflation rate.

Deflationary pressures eased in Japan but firm evidence that deflation has ended is still awaited.

To be sure, the challenges facing the world's economic policy makers during the next several years will be different from those that they have faced since the collapse of the NASDAQ bubble. The risks associated with inflation are probably less dangerous than those generated by collapsing output and the threat of deflation.

Policymakers will have to worry about a strange beast called stag deflation (a combination of economic stagnation recession and deflation) about liquidity traps (when official interest rates become so close to zero that traditional monetary policy loses effectiveness) and about debt deflation (the rise in the real value of nominal debts, increasing the risk of bankruptcy for distressed households, firms, financial institutions, and governments).

Price deflation is far more likely in the near term. But temporary deflation need not be the terror that central bankers fear, at least if the banking system is recapitalized and if interest rates in the industrial countries fall sharply.

I can't deal with any threat. This was a big threat.

But, in order to stave off the threat of deflation and depression, it is targeting a lower unemployment rate, below 6.5 . As progress toward that target is made, Fed Chairman Ben Bernanke announced in late May, the Fed will begin to taper its program of long term asset purchases known as quantitative easing (QE).

Early in that terrible decade, deflation became a reality for nearly all countries and for all of the advanced economies. In the last two years, at least six of the advanced economies and as many as eight have been coping with deflation.

Threat assessment

The inability of unconventional monetary policies to prevent outright deflation partly reflects the fact that such policies seek to weaken the currency, thereby improving net exports and increasing inflation. This, however, is a zero sum game that merely exports deflation and recession to other economies.

Japan provides good lessons about where the true risks are, as it has been suffering from deflation or near deflation for 14 years. Since 1991, Japan has been mired in what Harvard economist Alvin Hansen, a contemporary of Keynes, once described as secular stagnation.

A five year cumulative 30 deflation in prices and wages in Greece, for example which would mean five years of deepening and socially unacceptable depression even if feasible, this amount of deflation would exacerbate insolvency, given a 30 increase in the real value of debt.

Deflation increases the real (inflation adjusted) debt burden, as well as the real interest rate. Though there is little evidence of the importance of small changes in real interest rates, the effect of even mild deflation on real debt, year after year, can be significant.

In the summer of 2003, public debate and market sentiment in the euro area were influenced by Japan s protracted deflation and the expectation of a possibly severe disinflationary process in America. Some observers saw a risk of sustained deflation in the euro area as well.

Alarm Threat imminent.

Europe s Triple Threat

The Joblessness Threat

But now the eurozone seems incapable of escaping near deflation, with little economic growth and prices barely moving upwards.

The Team's trips focussed on States which face a high level of threat, which have particular knowledge of the threat or which it deemed vulnerable to the threat.

It's not a threat.

The threat is desertification.

China s Threat to Russia

But that is logically flawed even with deflation, real purchasing power would fall, and the real value of debts would rise (debt deflation), as the real depreciation occurs. More importantly, the exit path would restore growth right away, via nominal and real depreciation, avoiding a decade long depression.