Monday, April 13, 2009

European Model Avoids Risk of Inflation

As we know, European countries are suffering from the same economic crisis as America. Yet, Europe's efforts to slow and end the recession do not run the risk of inflation. America, on the other hand, will almost certainly suffer inflation in a few years. What's the difference?

In Europe, each country has implemented a fairly elaborate social safety net. To name just two such measures, European countries offer universal health care and robust minimum income measures. There are many others, of course.

As a result, European countries do not require a gargantuan stimulus package, because (a) human suffering is kept to a minimum through these safety nets, and (b) such government spending replaces the lack of private economic demand.

Thus, inflation is not likely to result in Europe.

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