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US inflation falls to 0%

In a rather alarming turn of events, it has today been revealed that US inflation has fallen to 0% for last 12 months and would actually have fallen below zero had it not been for a rise in the cost of food and petrol. The US is now facing a potential deflationary period where negative inflation sees the price of goods and services falling month on month causing a reduction in investment, increased unemployment and reduced income for consumers.

Once the economy is in this type of vicious circle it can be very difficult to pull away from it and there are desperate hopes that the US rescue package recently introduced by Barack Obama, will kick-start the ailing economy. There are now worrying comparisons with the 1930s which saw the US economy fall into a severe depression which took many years to turn around. In all honesty, many economists have been forecasting a period of deflation and a potential worldwide depression for some months now although we are now that little bit closer.

If the US economy falls into a severe depression there is every chance that the vast majority of other economies around the world will take a further lurch downwards. The US economy has for some time been the powerhouse of the worldwide economy, even though its influence may well have been reduced of late, but where the US goes many others still follow.

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