After months of defying gravity, the prices we pay for everyday necessities from groceries to gasoline are coming back down to Earth.

In the United States, a closely watched gauge of ground-level inflation, the Consumer Price Index, has suffered its largest one-month drop in 61 years. A 14% tailspin in gas prices in October led the declines; the overall CPI fell 1% during the month.

At a time when the economic news sounds like a keening wail of ever more catastrophic stats, you might think falling prices are a rare spot of good news. And of course, they are - to a point.

Being able to fill your shopping cart or fuel tank without driving your household into hock (and maybe even having some spare change left) is obviously cause for relief.  It’s been a while since most of us have felt like masters of the universe at our local shopping malls. In recent months, approaching the till at the supermarket has felt a bit like easing into the dentist’s chair for root canal work.

But this is a case where every silver lining has a cloud.

The problem, according to economists – those perennial killjoys - is when falling prices turn into a self-fulfilling prophecy and continue falling long after they should have naturally stopped.

This phenomenon is known as deflation. Left untreated, it can induce a vicious downward spiral in economies that only yesterday seemed fighting fit.

The former US Labour Secretary Robert Reich warned about the risks of deflation five years ago.

If prices are falling because companies are being more productive, he noted, then there’s usually no need to fret. However, if companies feel driven to cut prices in order to lure buyers, then things are more serious. The immediate danger is lower profits, sliding salaries and, if things get dire enough, layoffs. Consumers tend to buy less - because they're holding off on purchases in the expectation that things will get even cheaper.

This translates into fewer store sales - and we're back where we started, with declining profits.

We’ve seen episodes of deflation in the recent (and not-so-recent) past, and it ain’t pretty.

Deflation was one of the most harrowing hallmarks of the Great Depression in the 1930s. Between December 1929 and March 1933, prices in the US plummeted by 25%, unemployment soared well into the double-digits as nearly 15 million Americans lost their jobs and real incomes nose-dived an astounding 40%! A little over a generation earlier, in the waning years of the 19^th century, collapsing railroad companies sparked a similarly nasty bout of deflation.

Fresher in our memories, there's Japan's so-called "Lost Decade" of the 1990s. Salaries were shaved, people started spending less and, leery of putting their money in wobbly banks, they stashed cash under their mattresses.

Adding to the grim picture, property prices also headed south. People who wanted to sell their homes were stuck waiting for the market to restore value to their investments.

Now, having evoked these deflationary doomsday episodes from the past – it must be said that we are not there yet in the current downturn.

The Nobel Economics laureate Joseph Stiglitz says that what we’re witnessing now is more akin to “accelerated disinflation”. That is, prices are coming down. But overall inflation still remains above levels that many feel comfortable with.

If deflation does take hold, and refuses to loosen its grip, we might all rue the day when we harrumphed over high prices.