WHERE is that deflation we keep being promised?
It’s not with us yet. Quite the contrary. Its evil twin, inflation has just soared to 5.2 per cent. Despite this, several of those sage economic analysts who, as we know, are invariably able to predict the future with uncanny accuracy, state that the real threat to the economy is not prices going up but prices going down.
The spectre of deflation was first invoked about three years ago. We were chilled to the marrow by news that inflation had tumbled to 1.2 per cent or some shockingly low figure. The message was plain. Deflation was on its way and it was out to get us!
What actually happened, of course, was a savage bout of in-flation as prices began to rise remorselessly. Quarterly fuel bills are the sort of sum that Roman Abramovitch pays to sign a new striker.
But still we are told that the real enemy at the gates is deflation and that the ghastly prospect of prices going down is what really lies in store.
Now, I’ve read why deflation is bad for us. Falling prices mean that firms earn less and therefore invest less. Also, the public gets used to goods getting cheaper and cheaper and therefore they continually put off buying that new plasma screen TV, leather sofa, smartphone or pint of milk, in the knowledge that if they hang on a bit they will get it for less. The economy contracts accordingly.
But try as I might, I cannot muster the right level of foreboding at the prospect of prices actually going down. In fact, it would be just the stimulus that the economy needs. So bring it on.
Hang on though. Can you seriously imagine goods and services getting exponentially cheaper? Here in the UK? The phrase “chance would be a fine thing” springs to mind.