Forget what central bankers say: deflation is the real monster

The ECB is eager to warn teenagers about inflation. But as price growth slows, that looks like yesterday’s scare story

The European Central Bank might like to update its website – specifically, its educational video to teach teenagers about the importance of keeping prices in check. In it, a spotted, fanged, snarling “inflation monster” floods money into the marketplace, making vivid the perils of prices rising too quickly. Near the end of the cartoon a much smaller, smiling, pink creature makes a brief appearance – the “deflation monster”.

Fear of inflation is understandable in a continent that saw devastating hyperinflation last century – a shock seen by some as pivotal in the rise of Hitler. But look around the eurozone now and the bigger threat is deflation.

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Six vital steps world leaders must agree to take to protect Earth

International talks in Paris in 2015 could see the world’s nations agree to limit global warming to a rise of 2C. Actually achieving that target will require huge commitments – not least by developed nations

Every year, carbon emissions from cars, factories and power plants across the planet rise inexorably. The resulting elevation in carbon dioxide levels in the atmosphere mean that in 30 years temperatures on Earth will be 2C hotter than they were in pre-industrial times, scientists say. This is the maximum temperature that they believe the world can tolerate without there being devastating environmental consequences: spreading deserts, worsening storms and widespread flooding. Therefore, the first and most important decision that world leaders need to take at the Paris climate talks next year is to agree, through a binding commitment, that 2C is the upper, acceptable limit of global warming on Earth. All other decisions taken in Paris will follow as a consequence of that agreement.

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