ChrisLKKB
I am referring to the massive amounts of money disappearing from global economies, the drop in oil and food prices and lack of credit, the fall in demand and output. I find the reason given by the Bank of England for cutting rates today interesting. It stated that today's cut was to achieve the 2% inflation target. The traditional solution to high inflation is to increase interest rates, but that is not the case. I'm not disagreeing with the cuts, just querying the reason given. Inflation is not, as I see it, the problem, nor did it get us into this mess. Deflation on the other hand could be devastating, with an ever downward spiral. The classic remedy for deflation, although short term, is to cut bank rates, which is what they did today. Maybe I am premature with this call, but I feel that if the bottom isn't reached soon with the financial markets, deflation could be the new enemy during 2009.