We lay awake last night wondering if we’d made a terrible mistake warning notes readers of the coming “Great Inflation.” We know that the government is spending unprecedented sums of borrowed and printed cash to ‘fix’ the economy… the money supply as measured by M2 is shooting up (at an annualized rate of 14% over the past six months)… but the threat of deflation remains.

Bloomberg.com reports that Janet Yellen, president of the San Francisco Fed bank, says, to my complete disbelief, “For some time to come, disinflation, and even deflation, will represent greater risks than inflation.”

In the currency market, the dollar gained ground vs. the euro. Late Tuesday, the euro was trading at $1.3285 vs. $1.3363 on Monday.

The consumer price index (CPI) moved 0.4% in February, a little higher than expected and a sign that consumers are dipping their feet back into the water – slowly.

Like a vanquished enemy, inflation has been out of sight and out of mind. But old enemies can resurrect themselves.  And that’s just what’s going to happen with inflation, two fixed-income experts say.

The question facing every investor today, and the one that could wield a very large influence over one’s investment fortunes – is whether deflation or inflation will hold sway during the next couple of years.

Since January, deflation in the economies of East and Central Europe, including the Baltic Republics and the Balkans, has started to to pick up steam as banks crash, stock markets collapse and local currencies plunge.

The 1970s didn’t just curse the world with cheap German wine and the Bay City Rollers. That decade gave us soaring inflation, too.

This recession isn’t like anything we’ve seen previously. Even I’ve cut back on the egregious amount of fast food dining I do in the face of deflation.

FTSEurofirst 300 falls 1.5 percent… Banks under pressure on poor economic outlook… Miners, oils slip…