The problem seems to be that when you add the impact of any further internal issues such as would cause consumer spending to slow then you can throw in deflation as well. What might do that?
Well, the US housing boom carking it? That would have a substantial impact on consumer apetite for increased personal expenditure and debt. In fact a rise in interest rates in itself could trigger the whole house of cards collapsing as grossly indebted households who have funded their spending by drawing down the rquity in their booming house valuations suddenly find themselves faced with a/ increased interest repayments, b/ declining asset values - this time the house and any investment properties, and finally c/ job insecurity as industry reacts to slowing consumption by cutting workforce.
All this a deadly cycle that could easily eat itself.
One of the joys of course overseas is that with most foreign debt denominated in USD the relative debt level expressed in say AUD is declining, as is the interest bill...
