Depression, not deflation

Beginning in Economics 101, through graduate school and after 35 years as an analyst with a solid track record of forecasting global socioeconomic and geopolitical trends, never, ever did college professors, government heads, business leaders or central bankers promote the concept that falling prices are bad — and rising prices are good.

In fact, the opposite was taught.

Inflation was seen as a hindrance to sustained economic growth and a tax upon working people — especially if wages didn’t keep up with rising prices. When, and if, prices and the cost of living dropped (deflation), it was cheered as good news.  

What a difference a few decades, a banker-induced economic calamity and a steady stream of propaganda make.

Pick up any newspaper. Listen to the major business channels. This is the way the “deflation is bad” story is commonly told: “As consumers expect goods to become cheaper in the future, they postpone purchases, worsening the slump.” (Financial Times, Jan. 10, 2015.)

Much of Europe is reeling between recession and depression. Unemployment rates in many countries are at post-World War II highs. Consumption and prices are down because large segments of the population are broke, not because they are waiting for prices to go down! It’s called supply and demand! There is too much product and not enough cash in consumers’ hands to buy it.

The same holds true in the US and other economies in which the growth of jobs trends between down and tepid, while real wages keep falling. Should prices continue to fall and as more workers drop out of the job market (labor force participation rates), what is now being called deflation will devolve into depression.

Racking up debt-to-GDP ratios well into triple digits, anti-deflation governments and central bank champions, unable to service their massive debt, are pushing for inflation to help pay off that debt with dramatically devalued currencies.

Indeed, what’s good for Zimbabwe and other Third World countries is good for once-prosperous nations that have gambled away their future by artificially and fraudulently pumping up their equity and real estate markets.

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