So few miss the deflationary picture that is taking place. They are looking up when they should be looking down.

A central bank never worries about inflation. Most believe that is because central banks love inflation and welcome it. That is completely false. Yes they do like some mild inflation but runaway inflation does not make them happy.

The difference is they have something they can do about inflation. It is the easiest thing for a central bank to stop. Simply blast interest rates through the roof and inflation is stopped. Of course, the economy is crushed at the same time but that takes care of inflation.

Deflation, on the other hand, that is something banks have no answer for. They can only try to print following the misguided beliefs of academics who tell them money printing will lead to inflation.

Sadly for the central banks, it does not. Instead, we get deflationary pressures as more money is going to service debt and less to innovation. Contracting economies only feed into this even more, repeating the cycle.

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