1. Wages and output fall.

This is seriously hellish, for any country. Deflation fires off a tonne of things central bankers don’t want in a grown-up economy: falling wages and lower output.

Debt increases. The economy sputters. Consumers become timid and, in extreme cases, start to hoard. Currency wars can be triggered as financial technocrats devalue currencies to compete. It’s bad, bad all around.

2. Money supply contracts.

Let’s define deflation before wading in deeper. Some think deflation means falling prices. Falling prices can be a side effect. But deflation means a country’s money supply tightens. It’s hard to find credit. It’s hard to borrow.

Responding, central banks try to persuade businesses and the public to feel better. They attempt to increase economic busyness. They promise cheap money.

They snip interest rates or electronically print off more cash, known as quantitative easing (like rattling the money box till it hurts). It’s okay to borrow and the cash on offer is cheaper than yesterday, they say.

But central bankers rely on demand. They can’t force you to borrow or invest. You have to believe!

Deflation means a country's money supply tightens which can lead to falling prices: corlaffra/Shutterstock.com

3. Investing and business planning is put on hold.

Central banks (and most sensible governments) like economies with a bit of get-up-and-go. A ‘Goldilocks economy’ – not too cold, not too hot, but just right.

A modest amount of confidence is good, which means borrowing usually. But if deflation lurks, borrowing is put off. Why load up on debt if your profits might drop tomorrow?

Why take on debt if the value of your assets slides in six months? Why ‘invest’ if credit is cheaper – possibly a lot – in a year’s time? (Heck, money might even become ‘free’.)

There’s more: if you’re a business and there’s deflation, you may struggle to make a profit. It might be because of low demand. Or you’re forced to make lay-offs.

        4. The cost of long-term debt rises.

Deflation hangs about like a bad smell.

Borrowed cash is a great idea when inflation thumps the long-term value of borrowed money. But it’s not so smart when inflation, which is supposed to smooth out that longer term risk, fails to show up. Debt’s a dead weight on growth and profits. It’s hard to kill off, dammit.

5. Public confidence falls.

It’s a slight stretch but imagine a central bank as a wealthy, distant relative. An austere one many times removed. You need a good excuse for a visit – especially if you turn up smelling poor.

In 2008 there wasn’t much choice. Many commercial banks were struggling with savagely weakened balance sheets. Queues of frantic, angry savers wanted their cash back. They snaked down the high street and beyond.

So central bankers, backed by their national governments, chucked cash at the enfeebled banks. They did this partly via quantitative easing, in the hope that cheap credit would get banks back on track. It was an all-out emergency.

But you don’t want emergencies. Or outstretched hands. Or seeing sensible members of your family stuff cash under the floorboards because they can’t trust their local branch of Northern Rock. (Northern Rock had been on a huge lending binge and was struggling to make payments through the settlement system.) Central bankers are no different.    

Central banks don't want emergancies and public confidence to fall: Yiorgos GR/Shutterstock.com

6. Cheap shop prices aren’t always good news.

When deflation grips, prices for goods and services can – but not always – fall. Some prices slip and stock is shifted.

Cashflow improves. It’s quite nice for a bit. But deflation can spur the value of physical commodities such as property and gold higher (though not always) if other asset classes go off the boil.

Cheaper baked beans and orange juice is fine for a while. But if the cost of a roof over your head rises, or the price of other assets starts to climb in response, its charms are short-lived.

7. It distracts from other fiscal and financial issues.

Deflation is just one of several responsibilities in a central banker’s day. Part of the day job is controlling a nation’s money supply – basic monetary policy lever pulling.

Money needs to get from lender to borrower without issue. It doesn’t stop there. Central bankers need to keep a close eye on government fiscal policy, such as tax rates and spending (not their domain but not unrelated either).

So there’s a lot arriving in the daily in-tray: money supply, public trust, bank balance sheet integrity, price stability, productivity… And in 2017 the complexities of Brexit and the election of an ex-gameshow host-turned-US president with big trade issues and questionable decision making.

Deflation? Another reminder on the to-do list.

8. It’s a highly public reality check.

It reminds central bankers there’s a real world out there. Tens of millions have their finances balanced on a pin.

Many central bankers are academics, not used to the glare of publicity. Reality is messy, confounding and an awfully big responsibility.

9. It’s grim but it’s not terror number one.

That honour goes to hyperinflation. Hyperinflation was 80 billion per cent in Zimbabwe in 2008. That’s a figure that puts the first world’s deflation angst in perspective.

But deflation feels awful. It leaks confidence and is contagious. It’s bad media headlines for central bankers too – “Why aren’t you doing enough?”.