But, while assets behave as if we face a 1930s type challenge, and need to worry about deflation, our chancellor reminded us of the 1970s yesterday.

Pay restraint seems so very 1970s. It wasn’t just Labour of course; the Ted Heath government used to rattle on about pay freezes.  The lesson from that time tells us it didn’t work.

But on the Andrew Marr show yesterday, Al whipped the wage inflation horse.   “From the boardroom to the shopfloor,” he said, inflation changes must be consistent with the 2 per cent inflation target.

“We’ve got to make sure that we keep inflation under control because if we don’t what will happen is that people may get a pay increase but every penny of it will be eaten up by rising prices in the shops…Now none of us want to see that happen, it’s in no-one’s interest and that applies from the top to the bottom, public and private sector alike,” said Mr Darling. Andrew Marr pressed him on whether that meant we would be worse off this year, but, not surprisngly, he didn’t answer that. Well, actually, as Mervyn King pointed out last week, our growth in income outstripped our productivity in the late 1990s and earlier this decade, and now we are just seeing the other side of that.  So yes, we will be getting worse off.

Oil and food are more expensive because demand has risen faster than supply.     If we try to nullify the effect of higher food and oil through wage rises, then inflation will be the  result.

But the picture is muddied by the retail price index.    The index we use to measure inflation by is a full percentage point above target.  This morning, the FT said that data from IDS Pay Databank, covering the three months to April, suggests one in five pay deals were linked to the retail price index.

The truth is, the retail price index gives a much more accurate picture of inflation.  If our wages increases are linked to the CPI index, then we will indeed be getting worse off.