At a press conference last week, the leader of an illustrious organization told reporters that, although he had no explanation for recent deflation, measures would be taken to prevent further deflation. For the New England Patriots football team, such measures include inflating game balls below quarterback Tom Brady’s preference for the lower-end of the league mandated 12.5 to 13.5 pounds per square inch range.
In the case of the European Central Bank, it means injecting 60 billion Euros into the economy each month in a new and expanded round of quantitative easing. Both efforts are inflationary and, according to some, necessary. While, as Brady explained, the deflated ball situation “isn’t ISIS…no one’s dying,” economic deflation has far more serious consequences. Global central banks have engaged in massive quantitative easing since Japan introduced the practice in the early 2000s. The ECB is arriving late to this solution largely due to resistance from the Germans caused by their fear of rampant inflation.