The great global economic establishment is once again divided as to what is going to happen next. Half say we are lurching toward a new bout of world inflation. Half say the danger is deflation and world recession, even depression.

In Britain the division of views is especially acute. Interest rates are quite high by world standards, but the monetary experts are urging that they should go higher still. Why? Because prices are rising, wage demands are hardening up and the fear is deep in British memories that once inflation gets a hold it spreads like a virus through the system, undermining savings, and that it is very hard to root out.

On the other hand, as the economists say, the global economy is clearly in rough shape, with the credit crunch halting U.S. economic growth, banks revealing huge losses, rocketing oil prices hitting economic activity, and indeed the entire consumer supply chain, and investment and spending, being cut back all round. This, claim the proponents of this viewpoint, clearly shows the need for lower interest rates, not higher ones.