In what seems to be a concerted action by the UK Treasury and the Bank of England, Bank Governor Mervyn King warned that pay demands for inflation-busting increases will be self-defeating if they trigger a rise in interest rates.

The Governor told the Treasury Select Committee of MPs that there is no magic bullet to protect workers from having their incomes squeezed by rising prices and interest rate increases. They could help themselves by avoiding excessive pay claims to cover the rising cost of living.

Cash-strapped families will find no shelter this year from rocketing oil and food prices.

“We are all in this together,” he said. “The most important thing is there’s no magic bullet that will protect the UK from higher oil and food prices imposed by the rest of the world. It is better than we face up to that now and recognize that fact, rather than pretend to ourselves that we can avoid it.”

MPC member, Tim Besley, said: “We have to adjust our living standards. One of the mistakes we can make collectively is to believe that by bidding up our wages we can somehow insulate ourselves from a global phenomenon - rising energy and food prices. If we do that that is a self-defeating process which will lead to higher inflation and wages will not end up being higher.”

Mervyn King said, “The cost of reducing inflation once it stays above the target for a period will be a very prolonged and deep slowdown in activity.”

With the housing market in meltdown, the next three years are set to be painful for everyone, with the possible exception of short sellers on the markets and the oil companies.

Ordinary folk need to batten down the hatches now, cut expenses to the minimum and protect their income sources as best they might. It’s not in the interests of the High Street, of course, but, for a few years at least, it’s everyone for himself.

One thing’s for sure, conditions will take the focus off rather abstract globalization matters, back to the real, local world that everyone lives in.