The Difference Between Deflation, Disinflation, and Transitory Inflation: Why Dennis Mitchell, CEO, and CIO at Starlight Capital Sees Disinflation Coming To Canada – March 3, 2022,
In the video below CEO and CIO at Starlight Capital Dennis Mitchell, uses the words “Disinflation” quite frequently while at the same time dismissing “Transitory Inflation”. It’s kind of a play on words, however, it can be understood if the words are properly defined
What is Disinflation (Disinflation Defined)
Disinflation is a decrease in the rate of inflation – a slowdown in the rate of increase of the general price level of goods and services in a nation’s gross domestic product over time. It is the opposite of relation.
What is Transitory Inflation
According to Current Federal Reserve Chairman Jerome Powell, Transitory Inflation means prices rising at the current pace would not leave “a permanent mark in the form of higher inflation,”
What Causes Consumer Price Inflation in this modern monetary System? Real Inflation vs Consumer Price Inflation
In the modern era, in most Western countries, central banks are not really central, and most of the money printing people often talk about doesn’t come from the central banks. When there’s an economic downturn, the Bank of Canada or the Federal Reserve doesn’t start sending you checks in the mail.
When there’s an economic downturn, especially in the modern era in which everyone knows Free market capitalism works as promised, economic downturns are caused by governments, mostly Financial government promises and government regulations on the economy.
Once you understand this, then you start to comprehend why a lot of people blame central banks for problems in the economy. I tend to blame everyone’s contribution to this system as the root cause, others, like to point the blame squarely on the central banks. Why I blame all of us is because based on history, it’s apparent that there was a DEMAND for this type of system.
Somewhere in history, people in civil society decided they wanted to get something for nothing. To comprehend what I’m referring to consider learning about why Socrates was skeptical about Democracy.
The Marxists, Leftists, and even some Right-Wingers, like civil society to be financially ignorant, why? Because for many, this is how they enrich themselves. Politicians enrich themselves by keeping society ignorant, as do many in the private and public sectors. This championing of ignorance, is why most people do not understand the root causes of consumer price inflation.
Most of the money in circulation today, is DEBT! Robert Toru Kiyosaki author of the world-famous book Rich Dad Poor Dad was the first person I ever heard use the words “money is debt”. Once you understand this you’ll further understand his slogan
“Rich people acquire assets. The poor and middle class acquire liabilities they think are assets,” rich dad says. The biggest challenge poor people have is knowing the difference between an asset and a liability. Knowing the difference between the two can help you become rich.
Once you comprehend that money is debt, something else should become clear, what entities are typically responsible for distributing money? The answer is Private banks and Governments. When the government needs to raise money it issues a bond that pays the owner interest. Now, the government can only pay the interest and principal on the bond if the government makes more money than it spends.
Obviously, most governments run perpetual deficits, so in this modern monetary theory, countries with “World Reserve Currency” status can comfortably run perpetual deficits and people will buy that debt knowing full well, that the chances of the government ever being solvent are highly unlikely. Making matters worse is that in our modern monetary system, the central banks of certain countries are often the MAIN buyers of government and private debts.
What does this mean? It actually means that a lot of Western nations and a lot of private companies would be bankrupt without their central banks. But this shouldn’t, however, be confused with money printing, because the whole point of these schemes, is to push liquidity into the marketplace. Get other suckers, sorry I mean get other people to get themselves into higher-priced debts to support this system.
Now, when this system appears to be working, it’s only natural that the people and the government start imagining that they should do more spending, because after all if this system wasn’t working, the economy would crash right?
What is Deflation? What is economic Deflation? and How Can Economic Deflation create Consumer Price Inflation
What is Economic Deflation
In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0%. Inflation reduces the value of currency over time, but sudden deflation increases it.
In economics, deflation is the most important contributor to CAPITALISM. Karl Marx was all about artificially raising prices, because Capitalism not only caused deflation in consumer prices, it also caused deflation in the price of LABOR. This is one of the reasons why FINANCIAL EDUCATION is so important to a capitalistic system because if you don’t understand capital, you won’t understand the difference between an asset and a liability. Karl Marx had no idea, what the difference between an asset and liability was, which is why instead of comprehending capital, Marx focused on money.
What is CAPITAL?
In economics, capital goods or capital consists of “those durable produced goods that are in turn used as productive inputs for further production” of goods and services. At the macroeconomic level, “the nation’s capital stock includes buildings, equipment, software, and inventories during a given year.”
The key thing to understand about the above paragraph are “durable” produced goods, because durable produced goods, create cash flow. A residential apartment is a durable good. Once you build a durable apartment building, the tenants will pay for the maintenance of the building. Even in the event, there is no money in this equation, the landlord or owner of the property, could charge the tenants by making them work to maintain the apartment.
Sure the tenants could decline, but if they do, the apartment building will DECLINE in value, as all buildings require some sort of maintenance. Once you comprehend capital, you can then point to a lack of productivity as the root cause of economic deflation. Via the democratic process, a lot of people who don’t understand capitalism will often vote for people who guarantee them poverty.
Politicians will make claims that because of systematic racism or the climate changing that the government should raise taxes and redistribute the wealth to more worthy causes and more worthy people. Now although these thoughts may seem seductive, they’re actually making productive people less productive. As this occurs, you start to get people like Dennis Mitchell and Jerome Powell who start playing on words.
Jerome Powell claimed inflation was transitory, meaning that the consumer price inflation was temporary, well because it was proven that inflation wasn’t temporary, people like Dennis Mitchell are now arguing that prior inflation is here to stay, but sometime in the future, we’re going to start seeing disinflation?
Meanwhile, because the central banks control interest rates, they’re going to keep interest rates artificially low, because if they normalize them, most Western governments that spent and regulated the economy too much would be forced to default on their debts. So from a productivity point of view, the economy of the world is screwed up and for many they like it this way because if most people are confused as to what’s going on they’ll be dependent on their thought leaders.
Interesting times ahead!