-- Posted Thursday, 23 April 2009 | | Source: GoldSeek.com
By Gary Tanashian
Did you know deflation has returned to the UK for the first time since JFK was running for president of the US? Well, this guardian.co.uk article wants you to know that yes, it is true! DEFLATION has returned!
"Deflation returned to Britain for the first time in nearly five decades last month as prices measured by the retail price index (RPI) were lower than the same time a year ago."
I have not belabored this point for a while now because with all the hopeful market activity of late, sprung by the heroic inflation efforts by Britain's leaders, along with those in the US, China and Europe with a dose of G20 and IMF noise thrown in for good measure, it was time for the deflation angle to take a back seat.
Now, I am not going to argue that deflation does not exist and is not possible. If the forces of credit contraction can overwhelm the desperate Keynesian Hail Mary attempt, then the dark forces of deflation and perhaps depression will indeed come calling. But please do not present to me falling prices as evidence of deflation, as this article does.
Falling prices should be good. No matter how a political and financial establishment would like to have us fear falling prices, they are good for the whole of society and are NOT deflation. Deflation can be defined as the contraction of credit leading to the contraction of money supply. Global authorities are inflating 24/7 and articles like this one, highlighting falling prices, help give them license to do so. The system is trying to save itself, but is not necessarily trying to help you or me.
Now of course, with the way a would-be sound and productive global economy has been perverted by decades of meddling policy, falling prices now come with a downside. That is because leverage is unwinding at the same time. So policy makers pretend that deflation (incorrectly defined as falling prices) is bad, most people believe them, and there is cover for more toxic policy. Do you see why my newsletter conjures up the Rabbit Hole? It is because you simply must get a different view on these clowns and stay one step ahead.
Inflation policy is happening 24/7 and it has nothing to do with prices. Authorities have no choice as this is the system they have built. The system will end if policy is not successful. I believe they will be ultimately successful, with success defined as a tepidly recovering economy with another leap (ho hum) in moral hazard that may hold the potential to end the system one day soon, if the current crisis has not already done so.
Your eyes are being diverted. I do not own a tin foil hat and I ignore those black helicopters flying outside my window. But I see articles like this and it really kind of ticks me off that most people believe in fairy tales about deflation, and those about inflation as well, for that matter. Inflation after all, is what is happening now. Never mind general prices. They will follow one day after the trade is well in progress.
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