What Is Deflation? – Deflation For Dummies

Deflation is good for you & any inflation is bad. To sum it up in a single sentence.

Inflation wipes out the value of the work you did in the past & deflation increases its value.

Inflation has caused the value of the work you did in 1976 to be worth 80% less in 2013 whereas deflation would have increased the value of the money you earned in 1976.

Deflation, would allow the money you earned in 1976 to buy twice as many things in 2013 than it did in 1976.

Despite this the mainstream media, central bankers and politicians push for inflation. Constantly.

Ask yourself this question.

If you put 1,856 pounds in the bank in 1976, would you prefer that money lost 80% of its value by 2013?

Or would you prefer putting 1,856 pounds in the bank in 1976 and having that money worth twice as much in 2013?

Or to put the question in another way.

Do you want the value of the money you earned in the past to increase as times goes on or would you prefer the value of the work you did in the past be wiped out completely?

This is what inflation is.

Inflation devalues the work you did in the past.

To use an example

In 1976, a base Ford Fiesta cost 1,856 pounds. In 2013, a base Ford Fiesta costs 9,695 pounds. A Ford Fiesta costs around 5 times more in 2013 than it did in 1976 or to put in another way, the 1856 pounds you saved in 1976 to buy a ford Fiesta only buys 20% of a Fiesta in 2013.

Do you think it is fair for the work you did in the past to be devalued?

Or would you prefer it, if the money you earned in 1976 were worth more now then when you earned it?

Inflation is not a normal situation. It exactly opposes human progress. Here are two examples to show why.

1. Advances in technology mean that it takes less effort to make something today than it did in the past. Less effort means fewer materials and labour, which means less cost.

2. Advances in technology mean that the quality of your life is higher because machines and appliances now do the work you used to have to do.

You may argue that point 2 cancels itself out. People are spending the same amount of money as before but they are getting more for their money now. You bought a car with a cassette player in 1976 but in 2013, you get a car with satellite radio and Bluetooth for the same amount.

Okay, but what about the first point?

If people are spending the same as they did before, then why are things more expensive? Why is the Ford Fiesta with satellite radio and Bluetooth costing five times the price of the cassette version? At worst technological advancement would mean it cost the same (and probably less), so why does it cost five times more?

Because of inflation.

So why do we have inflation? Where does it come from?

The symptom of inflation is rising prices. Given that as man becomes more advanced things become cheaper there can only be one source of inflation.

The amount of money in existence must have increased.

And not increased by a little bit but by a massive amount. Money must be being printed faster than man is increasing the efficiency of people’s lives.

Not only is the printing of money stopping prices from going down, the printing of money is increasing prices.

Not only is money printing not maintaining the value of the work you did in the past, money printing is massively reducing the value of the work you did in the past.

And this is why inflation should be rejected.

And let me leave with one last illustration of the effect of deflation vs. inflation. If we use the inflation figures of the USA (before there was a monopoly on money printing) and if we use the inflation level of the past 50 years we get this:

With deflation

A salary of 20,000 Dollars in 1976 would be the same as a salary of 40,000 Dollars today.

instead with inflation

A salary of 20,000 Dollars in 1976 is the same as a salary of only 4,000 Dollars today.

Inflation has devalued the value of your 1976 labour by a massive 90%

The next time you here a central bank governor like Janet Yellen or Mark Carney saying inflation is good, remember what they are actually saying.

Not only do they not want the value of your labour today to increase in the future, they want to reduce it.

And not by a little bit, they want to completely destroy the value of the work you have done in your life.

So if inflation is so bad, why do we have it?  First, we have to understand the business model of the central banks that create the inflation. https://independence4walesdotcom.wordpress.com/2012/04/28/the-central-bank-business-model-how-it-works/

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