Falling prices are even more scary than rampant inflation
The latest economic stats, out this morning, show that on all its measures. They are all still high -- the underlying RPI, for example, is 4.7% -- but inflation is clearly on a downward trajectory (as City and government economists have been predicting) and set to tumble fast in the months ahead.
Some folks think rising prices will be replaced by falling prices as a deep recession bites and even the Prime Minister used the D-word yesterday when he reported to the Commons on the G20 economic summit in Washington at the weekend (and the further away we get from that summit the less impressive it looks).
Falling prices - or deflation as economists call it - might seem an attractive proposition because it means that, even without a pay rise, your money will go further. In fact, it is even more scary than rampant inflation. If people think prices are falling and will fall even further in the months ahead then they put off purchasing anything in anticipation of buying things more cheaply later. But if most people postpone their spending this merely tips the economy into a deflationary spiral which destroys economy growth and produces mass unemployment.
The Japanese recently endured just such deflation for over a decade and no matter what they tried -- zero interest rates, tax cuts, massive Keynsian pump-priming -- could not easily escape from it. The truth is economists know better how to handle inflation than they do deflation. Even today the Japanese economy is a shadow of its former miracle-working self. My own sense is that Britain is not on the brink of Japanese-style deflation but the RPI could go negative for a while in 2009, reflecting the continued slashing of interest rates. That could push the recession deeper than the consensus expects.
As well as our regular look at the economy today, we'll ask what more can Ministers do to ensure there's no repeat of the appalling catalogue of events that lead to the death of Baby P, whose tragedy continues to play big in the headlines. Children's Secretary Ed Balls is expected to announce a new multi-agency Children's Trust Boards which will be legally responsible for children. Mr Balls wants earlier intervention for children at risk. But will another layer of management and bureaucracy make a difference?
Also today British law now recognises Muslim Sharia tribunals which can hear family cases in England and Wales. The Government argues the move in no way overrides the courts but what are the dangers when it comes to the rights of women?
And do MPs need to know more about science?...apparently Tory MPs do and there are . We'll be doing some science testing of our own and talk to former Tomorrow's World presenter Gareth Jones.
Don't forget we want your views on Baby P, the price of your shopping basket and whether MPs need to know more about science: email us at daily.politics@bbc.co.uk and join me for the Daily Politics at Noon today on ³ÉÈË¿ìÊÖ2.
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