Two Faces of the Deflation Debate: Perception Versus Reality

The International Monetary Fund yesterday lowered its global growth forecast for a third time in less than a year. And in the past 24 hours, markets have responded in unison. The MSCI World Stock Index has dropped 1.4 percent, ICE Brent crude oil futures have fallen 2.1 percent and global bond yields have fallen to new lows.

In some European countries, two-year yields have even turned negative. Imagine paying indebted governments to hold your money. That's fear -- and a palpable perception deflation has already arrived.