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These Lies Could Trigger Another Market Collapse

The public has been brainwashed about deflation.

We've been hoodwinked by central banks, governments, and the manipulators who pull the reins of those Trojan horses into believing that deflation is a deadly disease. It's not.

Deflation, left to its own devices, is nothing more than a necessary and healthy corrective counterbalancing of excesses that build up in free-market economies.

So, why are we browbeaten into believing that deflation is so bad?

Here's the truth about deflation and how its fearmongers are really screwing us over.

Why Deflation Fears Drive Policy

First of all, deflation is when prices of commodities and goods and services fall.

When they increase, that's inflation.

Historically, deflation is woven into our subconscious as causing the Great Depression.

Which is convenient for the fearmongers, who swear they'll do everything in their power to prevent another depression. Their rallying cry is "stamp out deflation."

But deflation didn't cause the Great Depression. Deflation was a byproduct of a series of bad government and central bank decisions.

The Great Depression resulted from the excesses of the Roaring Twenties, which triggered the stock market crash of 1929. That on its own didn't cause the Depression, either.

How the government and bankers handled the crash exacerbated what would have been a tough recession, but their mishandling blossomed it into the Great Depression.

That's where the fear of deflation comes from. But that's rubbish. In fact, it's a lie.

Fast forward to 2008. We had another stock market crash, once again caused by excesses. The crash led to the Great Recession. And we're still nursing the hangover.

All that happened, really, was that interest rates were driven down by the Federal Reserve and lending standards were lowered to allow mortgage borrowers and corporations and banks to leverage themselves to take advantage of rising home prices, rising stock prices, and rising derivatives prices in an orgy of excess and greed.

No big deal, that happens. When the game ended, as it always does, the free market, as it always tries to, hammered home prices, stocks, and derivatives.

But while consumers could have largely benefited from the resultant deflation, wealthy investors in financial assets, governments, and the private bankers who run central banks, lose money in deflationary times.

And they're just not going to let that happen.

How the Fed and Banks Benefit from Inflation

As prices of homes, stocks, derivatives, commodities, and just about everything were falling, the Fed and the government went into high gear, ratcheting up fears of another Great Depression and lowering interest rates as their first line of deflation defense.

Now, here's the thing. As consumers, we are better off when prices decline after they've been artificially inflated by excess capital coursing through the economy with increasing velocity and speculative leverage that accompanies fast-rising prices.

When the speculative bubbles burst and leveraged consumers, producers, banks, and speculators get margin calls, dump assets, and stop buying hand over fist, prices drop quickly.

That's the free market doing what it does best, correcting excesses.

But, while that's good for the economy and especially middle-class Americans struggling with limited resources, it's not good for banks and it's not good for governments.

Join the conversation. Click here to jump to comments…

About the Author

Shah Gilani is the Event Trading Specialist for Money Map Press. He provides specific trading recommendations in Capital Wave Forecast, where he predicts gigantic "waves" of money forming and shows you how to play them for the biggest gains. In Zenith Trading Circle Shah reveals the worst companies in the markets - right from his coveted Bankruptcy Almanac - and how readers can trade them over and over again for huge gains. He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.

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  1. Henrik Unné | June 20, 2014

    Mr. Gilani neglected to mention that the government-sponsored labor union want inflation also. The labor unions exist for the purpose of ensuring that wages, counted in dollars and cents, constantly increase. The labor unions do not realize that it is better for the workers if the workers´ living standards rise by means of falling prices rather than rising wages.

    Now, but of course, wages cannot constantly rise unless the quantity of money constantly increases. So when push comes to shove, the labor unions always want inflation rather than stable money. I believe that I read somewhere that John Maynard Keynes once said something to the effect that inflation is a sine qua non of the labor unions.

    • Tactical111 | June 20, 2014

      Unions don't want inflation they want equitable pay, humane working conditions, and good benefits for their members while the CEOs prosper to the tune of billions of dollars like Walmart, for example. Unions are the voice and the power of the working slobs like me who otherwise get thrown under the bus by the 1% who own the Corps they work for.

      When I see the rich blaming Unions for all our woes it really chaps my hide. When 85 individuals in this World own more wealth than the bottom 3.5 BILLION people I'd say there is definitely a place for Unions.

      • Tom Smith | June 21, 2014

        Are you that naïve or is just listening to the Chicago Hoods? Unions should be banned from anything they try to do. The AFoL and the AMA are pawns of the European Bankers, and they have been since the early 1800s. Have you been asleep all this time? The AMA for example is just a union for the doctors, nothing more and not a bit less. They take all of their orders from the Illuminati, and this is not guess work on my part. I can prove it beyond all form of doubt. The reason I will not try is because I love my kids and do not want them sent to me in a box. Now for example we have an epidemic going on to cover up the New World Order's wish to depopulate this country. You call that fair, I call it plain murder. Why do you suppose that 250 million Americans now have Candidiasis? The media has to cover up their dreadful acts. Ignorant people don't understand or even care, so it sounds like you might be one of them…

        • Bruce | June 22, 2014

          Tom, put the the crack-pipe down, call social-services, and tell them that you are not fit to have children.

  2. Oliver Parsons | June 20, 2014

    I have read the previous money lessons from Shah and just finished reading this articale on deflation and inflation. I have got to say that the content and context of his information is very valuble for me and where I am in my current investment experience, and in the busy way we move now days. I truly appreciate reading information that is beneficial to me and not just text that one could carry the water cooler with. Thanks for the informative but more importantly concise content. Please continue…..

  3. H. Craig Bradley | June 20, 2014


    Rick Santelli ( MSNBC) calls "deflation" a "red herring", because what is really going on is a failure of Central Bankers everywhere to generate real, sustainable economic growth with their policies. Europe GDP varies, but overall is said to only be +.5 recently. That's not much, but it still is not quite negative growth or "deflation". So, assets remain sky-high at home and abroad, but for how much longer? NOBODY really knows the answer. Personally, I expect asset deflation but not much retail consumer price deflation. So, Rick is Right in that respect.

  4. Jeff P. in Canada | June 20, 2014

    Thank you Shah for puting all of this into a concise summary. The sad thing about it is that the general masses will never read it. That is not a slight on you. It is merely because the general masses are already so socialistic, uneducated, and generally lazy, that they couldn't give a crap.
    And therein lies the rub. They are socialistic, uneducated, and generally lazy because they won't read or educate themselves, and so the problems continue that tend to make them more that way. So there is no possible way for this to all change, short of a major world changing event like a major solar storm hitting the earth and wiping out all electricity, so that the dumb masses perish because they don't know how to survive without their smartphones.

  5. Robert | June 23, 2014

    Shaw has succinctly illuminated the hidden motivations of central bankers and their governmental co-conspirators as well as the weasel words they use to camouflage their true intentions. With the help of commodities futures markets to generate artificial demands, for products that will never be delivered, those who are separated from the ability to produce for their own needs are trapped in a vicious cycle.
    Were it not for central banks careful manipulations of interest rates to keep the bathtub overflowing with fiat currencies, the very act of applying new technologies should and would be delivering a rising standard of living for everyone. When Ben Bernake stated, “Economic policies have consequences” what I believe he was alluding to is the unfortunate side effect of the overflowing tub, which he created, would drown the poor souls who are trapped at the bottom due to the artificially increased prices and the debt burden required to simply survive. This has been going on for decades now and few of the people who are trapped under the surface will ever gain the perspective to understand the mechanics of their predicament as clearly as Shaw has described it.

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