Transcript of the above video: 

You know we constantly hear the term inflation. It's a word that is almost ubiquitous when you are listening to any kind of economic discussion out there you know, period. Regardless of the country. Inflation, it just seems like a constant. That said, deflation is just kind of overlooked, what's the saying? Success has a thousand fathers and defeat is an orphan you know it's like inflation has a thousand fathers or a thousand pundits in the economics space, in the sort of punditry world, meanwhile deflation is an orphan. It is never really talked about, it's not fully understood in my opinion. I'm not claiming to be an expert in all of this stuff, just more or less kind of an interested dabbler who has his own common sense. That said, I thought of making this video after reading a recent article from the Thai Examiner, that is thaiexaminer.com, the article is titled: Sea change to US markets sees baht rice sharply. Ailing Thai economy still ekes out tepid growth.

First off to the headline there, tepid, I heard Chris Hedges the other day on YouTube call it tepid. I have only ever seen that and every time I have heard it spoken is ‘tepid’ but maybe in my part of the country that's what they called it, it might be my accent, I don't know. In any event this notion of like ‘slow growth’. Well one, there is a big hunk of Thailand economy that you're not able to put a metric on it the way that bankers want to. GDP is entirely a function of bank credit, so when we see GDP numbers, all we are seeing is sort of the formal economy if you will. Meanwhile anybody who has ever been to Thailand knows the informal economy is the engine if you will, the economic dynamism of this nation. I mean that is pretty much a foregone conclusion at this point. That said, quoting directly: "Meanwhile Governor Sethaput," (that is the Governor of the Bank of Thailand I believe), quoting further: “has dismissed any concerns about deflation. The Central Banker pointed out that even with lower prices in some areas, consumers still continued spending." Well yeah they would. If prices go down of course they would. Now, here's the dichotomy. In my mind and don't take this as academic gospel but there are two kinds of deflation: there's the prices of things going down because we learn better techniques of building and making certain goods or harvesting certain agricultural products whatever. For example the first car probably cost a lot of money in adjusted terms because it was probably all handmade and it was very difficult to put it all together. Once the assembly line was created and we found new efficient ways of making cars, cars became affordable for everyone, it is just the nature of the beast. That is deflation. That is price deflation. The price of things going down, things getting cheaper because we are becoming better at producing them basically. Now what is interesting to me is there has been almost a hijacking to my mind of economic thought because if you go back into the 19th century, especially in the United States, and a good book for that I think it's back here on my bookshelf, Tragedy and Hope by Carol Quigley which is a tome of a read regarding history especially history of the West, but he gets in the real nuts and bolts and things and he talks about how in the 19th century we had we saw tremendous deflation because we saw all kinds of economic innovation that resulted in things costing less. But here's the problem with deflation. The added value to the consumer gained by the lower price for the same good, cannot be taxed by the Government. That's the problem. How do you strip off any wealth as the Government, as a taxing agent? How do you strip any wealth off of something falling in price? So like what am I talking about here? Let's say a can of paint on day whatever 1815, cost a dollar which is some fortune kind of money in that time, and I'm just making things up right now. But then five years later due to better technology, better techniques, economy is a scale, you can now buy that can of paint for 5 cents. Okay again, this is total hypothetical, how do you tax the saving? You can't. That's why certain authorities don't like deflation fundamentally. Now there's another type of deflation where everything sort of comes apart, the bank credit dries up and demand dies - demand for goods and services etc. Now that leads to things like the Great Depression where you have basically people who want to work and do things, not able to do it because the demand isn't there, because it's just deflated out,  because there has been a crash or people have withdrawn their capital from the market out of fear basically. That is a different thing in my mind. But again the notion that deflation is in and of itself bad is one of these misconceptions that really I think has undermined clear thinking in terms of economics both in the West and I think you can say here in Thailand. Meanwhile, in many ways inflation is a hidden tax because you can you can strip the wealth off of people again using things like the Cantillon Effect where especially if you have an oligarchy class that can kind of get to the money - we have this problem in the United States - they have free access to the newly printed money, they get first dibs on it. They go out and use it buy hard assets and they don't feel the effect of the inflation yet but then down the line the other people do. In a sense it really is a hidden tax if you will in a lot of different ways and it can be quantified so therefore it can be taxed. Again when asset prices go up, Capital Gains tax can be imposed for example. So at the end of the day, the thing to keep in mind is deflation is not the boogeyman that people make it out to be.