Let's first start by agreeing to call Inflation and Economic Growth the same thing.
Economic growth IS inflation.
Now this economic growth can be fueled by Visible Inflation (rising prices and rising salaries chasing prices higher) or Invisible Inflation (rising prices and flat salaries and rising debt chasing prices higher).
When I say the second is 'invisible' inflation, I say this because the way the CPI is structured currently, it ignores debt growth, which IS inflationary.
We can talk about why the government ignores debt growth when discussing inflation. My view on this is not very generous to the government. No one likes to be the bearer of bad news; no one likes to raise interest rates; no one likes to turn off the credit for the party; it can cost you your job in a democracy.
Ok; ALL Economic Growth is inflationary. There are two stage of Inflation or Economic Growth, two seasons. Inflation begins in the deepest part of Winter and is essentially results from the power of Deflation reaching an apex, and beginning to lose strength. This season, Winter, the first of two stages of Inflation, we will call REFLATION.
This is the season where the light of material evolution begins to grow ever so slowly, still buffeted by the harshness of deflation, but growth begins nonetheless. In this season interest rates are high, and start to come down. Interest rates have been raised because attempts to beat the inflation created by insane monetary policy have led to horrific inflation -- the silver lining is that high interest rates have helped to generate more safe investment income for the mass of Americans through savings accounts and other fixed income investments.
The REFLATION SEASON is akin to a PLANTING SEASON. The seeds of the next growth period are planted and endure the continuing darkness of the gestation season. Seeds do not become trees bearing fruit immediately. Historical periods of Reflation include, in this century, 1911-1920, 1947-1956; 1983-1992....one can take this ahead or backward with equal ease and accuracy.
The Second Stage of Inflation we will call INFLATION. This is the Spring Season, Spring to Summer, when the powers of Deflation are weak and getting weaker, and ultimately defeated. There is no shadow at Noon. The longest day of the year is June 21. This is when the force of Deflation -- the force of Anti-Matter -- is defeated. This is 2001, in our latest cycle.
During the INFLATION season the Dollar is strong and stock prices advance easily. As the first stage of REFLATION is largely fueled by savings, the second stage is often fueled by debt....as interest rates continue to come down. Historical Inflation Seasons: 1920-1929; 1956-1965; 1992-2001....
Here is where it gets tricky. The end of this Inflation Season, Summer, or High Noon, marks the end of the expansion. That is, the Death of the Economic Inflation. This last Inflation Season was marked by the symbolic horror of the destruction of the Twin Towers, the World Trade Center -- by Fire, through the Air. This is very similar to God's reaction to the tower of Babel, for which God punishes Man for his hubris ("Masters of the Universe") and divides the unified culture in half, into warring halves, to end evolution of the Tree of Life (Light or Matter), and begin evolution of the Tree of Knowledge (Darkness or Spirit).
The Third Season is Summer to Autumn; we call this the DISINFLATION SEASON. Disinflation means attempts to inflate fail; and monetary policy cannot resurrect the body of the dead Osiris, the diminished global economy. The Disinflation Season is the beginning of the decline into darkness. This is a picture of the Fall of Man from power, the Old King drowning in the Sea (of Matter).
Downsizing begins. Loss of possessions. Emptying out. This phenomena is ALWAYS THE SAME. Historical periods of this century's Disinflation Season correspond to: 1929-1938; 1965-1974; 2001-2010.
What should be done at the transition from Inflation to Disinflation is that interest rates should be slowly raised. Now a reader might cry: why raise interest rates if there is no inflation. THERE IS ALWAYS INFLATION THROUGH THE INFLATION SEASON, either visible or invisible inflation.
In 1929, the inflation was almost all debt (invisible); in and after 1965, the inflation was almost all salary inflation (visible); in and after 2001, the inflation was almost all debt (invisible). Inflation and growth are the same thing, remember. Greenspan began to raise interest rates in 2004-5, but lost his nerve and quit.
Bernanke does not realize that these seasons exist. He thinks it's all about the 'will to win', which it is not. So, in 2001, begin to raise interest rates, and continue to raise interest rates until 2019. Yes, this will be painful. But not as painful as trying to destroy a mountain of debt one builds by trying to rekindle Inflation during the Disinflation Season.
Inflation is a white hole that spews matter into the universe. Deflation is a black hole that sucks matter out of the universe and into the anti-universe, where it becomes anti-matter. The urge during the Disinflation Season is to preserve the world we build during the Inflation Season, the world we love, the world that is our security -- but which is now dead, which has no vitality, which has now vanished. Throwing good money into the black hole to try to preserve what used to be is a desperate act of denial.
The world has to die and be reborn. This happens every 36 years. And, while it is painful, it is also enriching spiritually, because the death experience also has an element of spiritual expansion of consciousness built into it. Think of America's death experience from 1965-1983. Tell me this was not a spiritual growth phase for America. We are in desperate need of another period of spiritual growth. The Inflation Season is governed by a worship of the Pagan gods, of pleasure, money and power. These are the gods that the Old and New Testament warn us against.
The Deflation Season is a return to the God of our cultural roots, in the root system of the Spiritual Heaven, which I have called the Anti-Universe. The Deflation Season is the Autumn to Winter Period. It is the period of essential destruction of debt and matter. Think of the other Deflation Seasons this century: 1938-1947 (remember World War II; the rise of fascism in the world; genocide); 1974-1983 (America lost a crooked vice president and president, lost its first war; genocide swept the earth again, in terms of America's war against primitive Asian societies, and primitive Asian societies resorting to communist genocide in Cambodia); 2010-2019:do we not understand that a new war is coming, born out of global depression, currency wars, and selfishness?
I have been accused by the governors of Seeking Alpha of being long-winded. I apologize for this. Ideas are very exciting to me. Once I start, it is hard to turn off.
Reflation Seasons should begin with high interest rates that come down; Disinflation Season should begin with low interest rates that begin to rise. Interest rates do not need to be micromanaged. Interest rates are long-term tools of balancing an economy -- as long as one follows the 36-year calendar, the world will become sustainable in its development and in its rest from development. Speculators have their day. But we do not want a world governed always by the greed and self-interest of speculation. Speculation and self-interest by Day; spiritual redemption by Night.
Michael J. Clark, CGTS