After some of the most severe falls in country GDPs on record, there are signs that the worst of the global economic crisis is behind us, leading many to believe that the post–Lehman Bros fears of deflation have proved alarmist in the face of unprecedented government intervention. However, in the United States total hours worked in the private sector are down by a dramatic 7 percent year-on-year and total pre-tax household income was recorded as falling by 3.4 percent year-on-year in July. In short, although the spectre of deflation may have receded for now, it has not gone away.

The global economy is now subject to the collision of three new realities:

•      economic, where for the first time in the post–World War II period the world cannot rely on the US consumer to be the spender of last resort;

•      financial, where deleveraging from financial