I'm an economic optimist. But the news just now does seem pretty awful. Consumers are nervous and spending less. Surveyors say house prices are plummeting faster than any time in the last 30 years (including the 1990s 'negative equity' period). Meanwhile, inflation has hit 3%. The price of manufactures is up 7.5% on the year to April. The pound is sliding, pushing import prices up. Public-sector trade unions are re-asserting themselves as they find that the government's 'generous' 2.5% wage rises don't actually keep abreast of inflation.

Will cheap imports from China continue to help us, though? Well, they've helped get us through a period that should have been a lot rougher than it was. Unfortunately they also helped convince us that the boom was never-ending. But now the Chinese themselves – and residents of other developing countries – are getting wealthier. They want the same computers and clothes that they've been exporting. They are demanding more the world's commodities like timber, steel, and cement, as they build new roads, houses, and factories. The West is finding that commodities and manufactured imports just aren't so cheap any more.

The fact that so many prices are tied to the dollar doesn't help either. US experts think the dollar slide may have bottomed out, but the fact that oil is priced in decrepit dollars is one reason why it's been soaring up from $100 a barrel. Many other wages and prices in developing countries are also tied to the dollar. It's not good inflationary news. And as Hayek tells us, inflation is a real killer because it overwhelms the subtle signals of the price system with a sort of inflationary white noise. Sure, the collapse has been sudden and the financial threats large: so I can see the case for easy money right now, even at the risk of some inflation. But once we all have confidence in the banks again, that inflation will have to be taken under control. The summer of discontent hasn't even started yet.