The Misconception of Deflation vs. Inflation


Some people have a very hard time understanding that we are in a massive deflationary spiral; they think that rising prices simply means it is inflation and not deflation. They only see prices, not disposable income, and certainly not economic growth and unemployment. Prices rose sharply following the OPEC oil price hikes, but the sharp rise in energy crowded out other forms of spending, resulting in rising prices that had nothing to do with a speculative economic expansion, but a deflationary contraction they called STAGFLATION – rising prices and declining economic growth.

This is like Hillary saying vaguely that she will press corporations to raise wages. Great plan, which as always, means absolutely nothing and illustrates that she has nothing to offer. Hillary revealed her position that government is never the problem. If you want to raise NET DISPOSABLE INCOME, lower taxes. Raising wages, as she argues corporations should do, will escalate people to higher tax brackets and soon all benefits will come into play with Obamacare. As always, nobody in government ever talks about reducing the size of government waste and corruption.

Household income will soon be defined as everyone living in the same house – kids and all. Perhaps you will have to pitch a tent and make the kids sleep outside with the dog to avoid “household” income tax increases. The deflation is not the lowering of prices, it is the lowering of economic activity that can also include STAGFLATION, which occurs when prices rise but there is no economic growth. So be very careful. If you only look at prices rising and ignore the fact that your disposable income is declining, you will be in for a very rude awakening.