Do you know you've got a banana in your ear?
YOU'VE GOT A BA-NA-NA IN YOUR EAR!
What? You'll have to speak up - I've got a banana in my ear.
Gah - WHY?
To keep the deflation away.
Deflation? But there is no deflation.
I know - effective, isn't it.
Over the last six months we've been lectured constantly that unless interest rates are cut to zero and the printing press cranked up to max, we are doomed to suffer death by deflationary spiral. Those of us who think this is much more likely to end in death by inflationary conflagration have been told we just don't understand (and we may well be bonkers).
But one of Britain's foremost authorities on monetary policy is now speaking up on our side of the argument. In a punchy seven page article, it reviews the supposed costs of deflation, and explains precisely how they've been over-hyped.
It points out that back in the nineteenth century, when Britain was on the Gold Standard (ie our money was tied to gold), prices used to fall routinely, and it didn't destroy our economic growth:
More recently, the price of goods has been through years of decline without apparently undermining our prosperity:
The paper also dismisses the "superficially convincing" argument that falling prices cause consumers to postpone purchases, as "flawed" - the cost of credit being far more important than falling prices per se.
It also points out that falling prices are not nearly as damaging to employment if wages are correspondingly flexible downwards - as seems to be the case in Britain today (see several recent deals to cut wages).
And finally, it notes that the costs of so-called debt deflation (whereby falling prices cause the real burden of debt to increase) are generally pretty small compared to the other things likely to be going in a deflating economy - such as collapsing property values and firms going bust.
And that chimes exactly with what we see going on around us. Our wealth has been shredded, our jobs have been shredded, our nerves have been shredded... the possibility that some prices may be falling a bit is really neither here nor there.
So who is this foremost monetary authority telling us deflation is a sideshow?
Why, blow me down - it's the Bank of England (see Deflation article in their latest Quarterly Bulletin here). The very same Bank of England that is so concerned about deflation that it's just slashed interest rates to 0.5%, and is currently flooding Britain with more money than Zim.
The truth is that the deflation bogeyman is being paraded around to distract us from something far scarier: Britain's savers are being pillaged to bail out Britain's debtors.
Because while falling prices increase the burden on debtors, savers gain. For them, falling prices mean that anyone with savings in, say, a simple building society account benefits from an increase in its buying power.
But the Bank is determined to prevent that outcome. Their paper says:
"The key element to... debt deflation... is the transfer of wealth from debtors to creditors caused by an unexpected fall in inflation. Since debtors are likely to have a higher propensity to consume than creditors, demand is likely to fall."
The message is clear: savers are a menace; unless you're prepared to spend spend spend, you shouldn't expect any help from our monetary commissars.
So bananas it is.
Bananas in the ear to ward off deflation.
And banana republic monetary policy to swipe your savings for the use of others.