It is now nearly seven years since the start of the financial crisis, yet despite growing evidence in America and Britain of a return to relative normality, something remains profoundly broken at the heart of the world economy. One manifestation of this – much discussed among the officials, finance ministers and central bankers gathered in Washington this week for the spring meeting of the International Monetary Fund – is the persistence of unnaturally low interest rates. Sometimes, economic developments creep up on you almost unawares – and then, all of a sudden, they are the established reality. One such phenomenon is now almost universal: even in Spain, long-term rates have fallen to the point where they are almost as low as in the US – a dramatic turnaround given that as recently as two years ago, yields on Spanish government bonds were off the scale over fears of a sovereign debt default. Even Greece, so bad a basket case that most of its sovereign debt had to be written off, has this week been able to tap the markets for new money at rates of close to 5 per cent. Two years ago, Greek bonds were yielding six times that. Optimists hail this change as evidence that Europe is finally out of the woods. To some degree this is true. A series of 11th-hour interventions by the European Central Bank (ECB) – at just the point that it looked as if it was all over for the beleaguered euro – have succeeded in calming the crisis. But it is also indicative of a much more worrying possibility: the emergence of a permanently low-growth, low-inflation, or even deflationary world. More