And that's basically deflation 50 percent deflation.

Get that spare tyre out.

A nail penetrated the car tyre.

That's a 50 percent deflation rate.

Gets a tyre iron from the garage, comes back inside,

So you're already seeing deflation in wages.

That's the dividing line between inflation and deflation.

So because of our innovation, we actually experienced deflation.

You see we've had a couple of bouts of deflation.

Everyone's talking about inflation and deflation these days, including myself.

And the opposite of inflation, if things actually get cheaper, is deflation.

He got a flat tyre. I'll drop him off at his place on my way home.

In terms of price performance, that's a 40 to 50 percent deflation rate.

Actually, let me draw a zero line, so you can separate inflation from deflation.

All the talk today is about are we going to see inflation or deflation.

Nantucket was her great original the Tyre of this Carthage the place where the first dead American whale was stranded.

In the last video I spoke a bunch about the determining factor on whether we have inflation or deflation.

And trust me, this will eventually lead to whether we're going to see inflation or deflation in this economy.

I've done a bunch of videos now on inflation and deflation and how they can be impacted by capacity utilization.

That leads to deflation and we'll talk in future videos why in many circles that is viewed as a scary thing.

If you have 50 percent deflation, people may increase their volume 30, 40 percent, but they won't keep up with it.

We had deflation during the Depression, but that was collapse of the money supply, collapse of consumer confidence, a completely different phenomena.

I'll return to the drawing board, literally, in the next video and we can proceed with our discussion of inflation and deflation.

But, in any case, the deflation of this glacier since 1984 has been higher than the Eiffel Tower, higher than the Empire State Building.

A lot of people, when I have this inflation deflation argument, they make this argument that China and India are going to continue growing.

And when so much of our economy, and even the basket of goods in the CPl and I'll do another video on that is service based, if you're seeing deflation in wages, that's another data point that tells you, at least in the medium term, we're probably going to see further deflation in prices as a whole.

And so in the situation that we're in right now, if you're wondering about whether you're going to see inflation or deflation, my argument is look at capacity utilization.

And we'll talk in the future about inflation and deflation and the fact that there is a constraint on how much gold can be produced, but you can print money.

The intent of this playlist is eventually for you to be able to go to your econ professor and say, no, we won't or we will have inflation or deflation for reasons x, y, and z.

But no, this is a very important point, because the money was put to work in actual productive investments that create wealth, that make the pie bigger, or the pie of apples bigger, we actually experience deflation.

And I want to give him full credit because he really is who pointed out a lot of this to me, but I think it's very instructive to the capacity utilization and inflation deflation argument that I've been making.