Unemployment is high. Bank lending is low. We've apparently got spare capacity coming out of our ears.
Yet for Britons at least, inflation just isn't going away.
In March, the consumer prices index (CPI) and every other measure of inflation rose once again. CPI hit an annual growth rate of 3.4% from 3% in February - economists had been forecasting 3.2%. The retail prices index - which includes housing costs - hit 4.4%, and RPIX (which excludes mortgage interest bills and used to be the Bank of England's target measure) jumped by 4.8% year-on-year, from 4.2% in February.
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However you look at it, those are big numbers. The CPI target is 2%. Bank Governor Mervyn King is well into letter-writing territory. And even if you look at 'core' inflation, which excludes fuel and food prices, it still grew by more than expected, rising by 3% year-on-year.
The one consolation for the central bank is that the last time inflation was this high was back in autumn 2008, when CPI hit 5.2% in September (it hit 3.5% in January 2010, but the other measures were far tamer than they are now). But that was the peak. As the economy plunged into recession, inflation tumbled, and CPI was down to 1.1% by September 2009.
But of course, that's something of a double-edged sword. Because a nose-dive back into recession would be a pretty painful way to get the inflation figures down. Yet if the recovery is genuine, and inflation shows no sign of falling back, then the Bank is taking a big risk in keeping rates this low. If workers start to worry about the rising cost of living, it'll get tougher to keep pay deals down, particularly if companies are genuinely seeing better times.
And savers are being wiped out. Real interest rates (the inflation rate minus the base rate) now stand at a miserable negative 2.9%, and that's assuming you take CPI, the most forgiving inflation measure. No wonder people are piling into more speculative investments they'd rather take an uncertain risk than the guaranteed loss you'll get with most savings accounts.
So what happens next? It's a tough call, but one of the most important when it comes to your investments. So we've just pulled in some of the smartest pundits we know on both sides of the inflation / deflation debate for a roundtable discussion. The ensuing - rather heated - argument will be our cover story in the next issue of MoneyWeek, out on Friday. If you're not yet a subscriber, subscribe to MoneyWeek magazine.
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