Gavyn Davies attempts a rather hard task: explaining conventional economics to Guardian readers. And explains it very well actually.
Deflation is defined as a pervasive decline in the general price level, not just a decline in the relative prices of a few goods (which is an inevitable feature of a healthy competitive economy). When such a decline starts, three very dangerous things can happen. First, real (inflation-adjusted) interest rates rise, and the central bank becomes powerless to prevent this, because it cannot reduce the level of nominal interest rates below zero. As the rate of deflation gets larger, the real rate of interest actually increases, and this perversely tightens the stance of monetary policy.
It\’s all rather pearls before swine given the Guardian\’s readership but why not raise the average IQ of the piece\’s readership by giving it a go?