The threat of deflation

Zero interest rates, record borrowing, printing money; the government has indicated that it is prepared to consider anything to slay the spectre of deflation. But if deflation is really such a bad thing — and I’m not convinced that, in a mild form, it is — then perhaps ministers should look at reining in a culprit whose role in promoting deflation has scarcely been mentioned: the internet.

We are forever reminded about the deflationary pressures which have arisen from the huge shift of manufacturing to Asia. But what about the influence of the vast discount store that is the worldwide web? Any author hoping for a Christmas royalties bonus will already have had a foretaste of the debilitating effects of deflation. Just look on Amazon and you will see why your earnings are so measly. Why is it that within days of a book being published you can buy a brand-new copy of it online for less than half the published price? Let’s take one at random.