A deflationary position, whereby general prices fall, creates enormous problems for businesses and manufacturing industry, especially in Britain. A good example is the steel industry. The problems in the steel industry in south Wales are created by the falling international price of cold-rolled coil. It has fallen to a point where it is not possible for the British steel industry to make a profit in many areas of Britain. Somebody else may make a profit somewhere else in the world, but not the British economy.
Japan has a different sort of economy, but it showed the dangers of general price deflation.
We are therefore back to good old fiscal policy. Mr. Letwin indicated dissent . Gentleman shakes his head because he is a creature of the 1980s fashion that fiscal policy is bad and monetary policy is good. He now nods, but in economics, fashion changes, and it is beginning to change now. Fiscal policy is again beginning to become more important than monetary policy.