In the United Kingdom and throughout Europe, the crisis has expanded a lot and has made strong damage on the financial markets. Well, that's a fact and everybody knows that.
However, the crisis in the real economy could be solve by the deflation which is happening at the moment. First of all, the deflation is only due to the oil price which has came down as you can see on the graph of the brent quoted in London. The deflation is not a consequence of the decreasing economy but of the decreasing oil price.
Consequently, as the price of goods are going to be lower, if the firms are likely to decrease their prices, the consumers are going to spend more. I know that for a fact, the income of employees are very hard to reduce. Well, it is the case for instance in France. So, the crisis could be solve by the consumption. Keynes may be very happy at the moment (relaunch economy by the state and by consumption).
Although, the deflation is not a very good sign of economic growth, it could relaunch real economy. But the financial markets reacted very badly to this deflation because they tend to look only at the bad point of this: the sign of an economic slowdown.
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I also think that the deflation has a positive and negative aspect.
The deflation is good for the consumers who will able to spend more money and then it will relaunch the consumption. But too much deflation could be risky for the economy, as you said, it is a sign of a slowing down economy, and it will put the consumers in a state of uncertainty concerning the future. This could lead the consumers to save money in case of a future unfortunate event!
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