Are Simultaneous Inflation and Deflation Possible?
I often have friends and clients ask me how I can talk about inflation and deflation in the same breath. They’ve asked: “But I thought that inflation and deflation were contradictory. How do you think that we could experience both inflation and deflation at the same time?” Let me explain, starting with a bit of background: The fractional reserve banking system, based on usury, creates money. Here is a simplified example: Each time you deposit a $1,000 at your local bank, the bank then lends nearly all of that money out to someone else, charging interest. The bank holds just a small reserve (“the fraction”) to cover the their likely daily withdrawal demands. Now, say that $950 of your deposited money is borrowed by a business, to purchase raw materials. The seller of those materials will deposit the payment check into his own bank. But then that bank can again lend nearly all of it out. The process goes on and on. Thus, the banking system has a multiplier effect: With the present-day 10
