In 1927 Julian Huxley created the concept the ‘Tin Foil Hat’. This was a piece of headgear made from one or more sheets of aluminum foil worn on the head to protect the brain from electromagnetic fields, mind control, or mind reading. Later he transformed it into the ‘Tin Foil Hat Society’, a group of individuals who agreed to wear the tin foil hats to be sure to be free from government or alien influence.In 2016 author Mike Verge created the concept of the ‘Tin Foil Hat Society on Deflation’, the study of how deflation affects the world on a global basis. He went on to complain that he seemed to be the only  member of this society. As it turns out, he was wrong. On November 8, 2016,  the most aggressive member of this elite society proved to be Donald Trump!

I recently had a chance to interview Mike Verge, author of the newly published book, ‘Global Deflation, and the Next Great American Decade to Come’ (now available on Amazon).  In this stimulating conversation Verge explained that, since the time of the Romans, governments have borrowed dollars today, with the intent of paying it back later with cheaper “future dollars”.They have created a whole ‘inflation industry’ ofpoliticians, economists and eventually business schools to show the world how well their policies are working. But Verge suggests we should all put on our ‘Tin Foil Hats’ and learn to think like Trump.We should not listen to the all the hype. We should not listen to all the pundits. We should learn to think on our own. We need to listen to needs of everyone, not just the elite.We shouldseek the truth amongst all the noise…. just like Donald Trump.

To understand the basis of Trump’s success, Verge says that we must embrace new economic concepts like those in his book. One of these concepts is ‘The Inflation Bell Curve’.With this concept he says that inflation is not a single number, but rather a continuum whereby some items are inflating (ie health care) at the same time as other items are deflating (ie electronics).With inflation at roughly zero percent, this means that half the people are doing well (inflating salaries) and the other half are doing poorly, (deflating salaries). Trump addressed his message to the fifty percent of the population experiencing deflating salaries. We should learn from that.

To help us further understand the current economic situation, in his book, Verge creates many other simplified  models that explain complex economic concepts. He likens these models to ‘Deflation Sunglasses’.You put them on and all these economic complexities become clear.

To explain all of this, he depends on three key principles:

1. 1.      The forces of inflation and deflation are always in a “tug of war”. On the deflation side are:

ageing demographics, overcapacity, and extreme global debt levels. On the inflation side there is money printing, continual expansion of this debt, and government infrastructure spending.

1. 2.      Deflation can only be fully understood from a global perspective in U.S. dollars as all countries are trying to ‘export deflation and import inflation’.
2. 3.      The internet is the “Silent Killer”. It is the greatest deflationary force of all time.

In his book he goes on to describe a counter-intuitive world where oil prices drop, retailers are reduced to “Showrooms and phones”, banks are formed where nobody pays, and asset taxes replaces income taxes.  He does suggest some innovative economic scenarios. However, to fully understand and profit from these scenarios we will need  to first   put on ‘Trump’s Tin Foil Hat’ ! ……..  Go ahead. See if it fits!