Real World Shows Economics Has a Deflation Problem

Jacob Rothschild, the billionaire scion of arguably Europe's greatest banking dynasty says we're living through "the greatest experiment in monetary policy in the history of the world." There's a major flaw in the experiment, though: the real world isn't responding to policy in the way that the textbooks say it should. Moreover, it seems increasingly evident that the fears that led to zero interest rates and quantitative easing were at best overblown, if not entirely unjustified.

The economic quandary is easy to parse. Central banks almost everywhere have sanctioned a 2 percent inflation target as signifying financial Nirvana. But, as the table below shows, consumer prices in the world's major economies are rising much slower than that arbitrary ideal: