Cheap Oil Illustrates The Error Of Deflationphobia

Despite the fact that the supply of oil is limited in several oil producing countries either due to civil war (Libya, Syria, Iraq) or sanctions (Iran), the price of oil just keeps falling.

This is in part due to weak demand in for example Europe, and in part due to the increase in U.S. oil production.

This will benefit for example troubled economies in southern Europe, like Greece, as they will pay less for their oil imports and so have money that they can use to spend on other things-or pay off their debts.

But if you were to believe deflationphobes this is really bad news as this will lower price indexes and thus aggravate the “problem” of deflation. Pro-inflatonist ideology presents what is clearly a gain for these countries as a problem, illustrating how wrong this ideology is.

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