Deflation will knock Tax receipts

The EU is already in deflation. Although the European Central Bank claims that the Quantitative Easing recently announced will ‘do the trick,’ there is good reason to doubt this. For one thing we have had massive QE in the UK and yet we are about see deflation here. The Governor of the Bank of England has even spoken about his plans to reduce interest rates if deflation becomes ‘entrenched’. So he is not sure how damaging this could become. Interest rates are at an historic low we could never have imagined a few years ago. With this backdrop, what confidence can there be that the ECB intervention will have any lasting or useful effect? Let us bear in mind that for the size of the UK economy, our QE was a good deal larger than that announced for the rest of the entire Eurozone.