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Has the threat of deflation disappeared?

As more and more experts in the field of economics continue to discuss the threat of deflation in the UK there was some good news today when inflation fell by less than expected, from 4.1% to 3.1% against expectations of a fall to 2.7%. While it may seem strange that a less than expected fall in the rate of inflation has been well received, the threat of deflation is more serious at this stage of the economic cycle.

However, those who now believe that deflation has disappeared into the background may well have to think again unless the UK economy begins to stabilise at best. The constant drip feed of money into the market has made very little difference so far and there are serious concerns that the Bank of England is on the verge of "printing cash" to finance further rescue packages.

A number of observers are now looking back in history when the UK was literally been on the verge of bankruptcy such as the mid-1970s when the International Monetary Fund came to the aid of the Labour government. Any similar type of move would be a complete disaster for the UK government, UK economy and the UK population and put the country back decades in comparison to its trading partners.

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