One is deflation that reduces prices and wages by 20 30 .

Estimates for Greece assume that prices and wages need to come down by 20 30 .

The theory s big idea is that if wages and prices are completely flexible, resources will be fully employed, so that any shock to the system will result in instantaneous adjustment of wages and prices to the new situation.

The second option is for Greece to go through a depression, reducing its wages and prices.

The proper functioning of the gold standard required a high degree of flexibility in wages and prices.

If exchange rates cannot depreciate, wages and prices need to fall when a country has an unsustainable current account deficit.

There, capital inflows create asset bubbles that tend to overheat the domestic economy and drive up wages and consumer prices inordinately.

Even with sticky wages and prices in Europe, the global slowdown will reduce energy, commodity, and food prices on world markets, all of which are important factors behind currently elevated European inflation levels.

Because consumer prices fell faster than wages, the welfare of those who remained employed rose in the Great Depression.

Ireland is the only country that has lowered its prices and wages, and its current account deficit is about to swing into surplus.

Likewise, a rapid deflation in prices and wages, known as an internal devaluation, would lead to five years of ever deepening depression.

Record high food and energy prices, combined with sharply rising wages in China, are pushing up inflation in much of the world.

There was therefore a rapid rise in prices, without any significant increase in salaries or wages in the Palestinian territories.

The last option deflation of wages and prices to reduce costs, achieve a real depreciation, and restore competitiveness is associated with ever deepening recession.

True, central planners no longer set wages, prices, interest rates, and quotas but party cadres, not market forces, control the economy s commanding heights.

Falling oil and commodity prices already down 15 from their peaks will somewhat reduce stagflationary forces in the global economy, yet inflation is becoming more entrenched via a vicious circle of rising prices, wages, and costs.

The new business cycle also embeds a monetary policy that replaces concern with real wages with a focus on asset prices.

Finally, Thatcherism put paid to the policy of fixing prices and wages by central diktat or by tripartite bargains between governments, employers, and trade unions.

Associations committees of Catholic business owners, labor leaders, and officials must set quotas, prices, and wages within vertically connected swaths of the economy called corporations.

The rise in food and energy prices outpaced the gain in nominal wages, causing real average weekly earnings to decline in January, while the continued fall in home prices reduced wealth for the majority of households.

America s high rate of unemployment and the low rates of capacity utilization imply that there is little upward pressure on wages and prices in the US.

In three years, we may well see labor shortages, rising wages, and increasing prices in expanding sectors, accompanied by high unemployment elsewhere in the economy.

Its wages and prices must lag behind its competitors for years, while its economy goes through an extended slump until a new equilibrium is found.

The rapid increases in prices generally, made worse by increasing fuel prices in mid June 2001, not only made the poor even poorer but also lowered the real wages of those who remained employed.

Installing a conservative central banker helps to keep inflation expectations in check, thereby holding down long term interest rates and mitigating upward pressure on wages and prices.

Alexis Tsipras, the head of the Coalition of the Radical Left has a valid point internal devaluation cutting wages and prices is failing as a strategy.

First, with the current raw materials bonanza driving up prices of exported goods, the region is increasingly vulnerable to the so called Dutch disease, whereby higher wages and prices spread throughout the economy, weakening competitiveness, particularly in industrial markets.

Which do we see now? There are no places in the US economy where wages or product prices are rising more rapidly than expected.

Inflation affects those with assets (cash, bonds) or incomes (wages, income from saving accounts) that are not indexed (or are under indexed) to prices.

With China s wages soaring and rising oil prices driving up shipping costs, production in Mexico is suddenly looking much more attractive, even taking security concerns into account.

The resulting unusual economic environment of falling prices and wages can also have a damaging psychological impact on households and businesses. With deflation, we are heading into unknown territory.

Whereas pre 1980 monetary policy tacitly aimed at putting a floor under labor markets to preserve employment and wages, it now tacitly puts a floor under asset prices.

As the money rolled in, wages rose, real estate prices reached to near Parisian levels, and people fooled themselves into thinking that Kazakhstan had become Asia s latest tiger.

In the course of this transformation, millions of people joined the global economy, with wide ranging consequences many of which remain challenging for poverty, prices, wages, and income distributions.

An alternative is domestic deflation combined with extreme fiscal tightening that is, a period of slow or negative growth in wages, incomes, and some prices of non traded goods.

Even today, four years into the crisis, there are no signs that the overly expensive countries in Europe s southern periphery have begun devaluation in real terms by cutting wages and prices.

Apart from financial restructuring, which is crucial, Greece and Portugal must become cheaper in order to regain their competitiveness. Estimates for Greece assume that prices and wages need to come down by 20 30 .

They will be driven to tolerate higher inflation as a means of forcing investors into real assets, to accelerate deleveraging, and as a mechanism for facilitating downward adjustment in real wages and home prices.

But depression in the construction sector and unemployment among its ex workers would be balanced by exuberance in the manufacturing sector, rising prices for manufactured goods, and long hours and high wages for manufacturing workers

Nominal wages may increase, while real wages stagnate, owing to higher inflation.

But this is not true. Budget discipline will work only insofar as it drives the country into a depression and induces a real devaluation through a reduction in wages and prices, which is option two.

Determination of wages.

This may well look like structural unemployment in three years. In three years, we may well see labor shortages, rising wages, and increasing prices in expanding sectors, accompanied by high unemployment elsewhere in the economy.

Back then, against a backdrop of government reluctance to force debt write downs, along with massively over valued real housing prices and excessive real wages in some sectors, moderate inflation would have been extremely helpful.

This is a difficult task under the most favorable circumstances. The European Central Bank s low inflation target (2 ) renders it virtually impossible, as it implies requisite downward adjustment in wages and prices of 10 or more.