Why should we worry about falling consumer prices in the eurozone? The answer is that we should not.
For markets to work smoothly, prices need to move freely up and down. Then they work as signals, summoning resources to the uses in which they are most valuable. But relative movements are the only ones that matter. Deep currents might move two opposing fleets this way or that. But what concerns the admirals is how their boats move relative to each other.
Economists seem to know this well enough, so long as they stay inside the universities that are their natural habitats. Put them into central banks, however, and they obsess about preventing prices from falling. There, they concoct ingenious theories to justify their neuroses. If prices fall but wages do not, companies will have to fire workers. If wages fall but the burden of outstanding debt does not, those who owe money will be insolvent, or at least have less to spend.
