Disinflation

Disinflation (often confused with dat-inflation) refers to the decline in inflation rates over time. In 1973, America was fully juiced with war bucks from Vietnam. Inflation hovered around the mid-to-high single digits...like, 7 percent or more, depending on where you looked. And then Jimmy Carter stepped in and raised Fed rates…massively, stamping out the wild bull economy, and putting the brakes on inflation.

But it didn’t happen until after Carter was actually out of office and Reagan took over. Inflation eventually had rocketed all the way to 14ish percent in 1980/81. The crux of disinflation is that inflation is still positive—it’s just becoming…less so.

You know...like how you feel not long after you say “I do”...and the honeymoon is over.

So under Carter, the U.S. inflation rates were attacked in a variety of ways, the biggest of which was to make the cost of renting capital very expensive, which cooled the economy.

But it took a long time. Like, note how slowly inflation rates came down and, well, really, it was decades before things fully stabilized. You can see how things slowly disinflated from the raging levels it peaked at post Vietnam...to 13, 14 percent...then slid allll the way down to 1-3 percent, where it has hovered for a while.

So that’s disinflation—still inflation—but just less of it. Deflation is when inflation turns negative. Like prices are actually declining. And we’ve had periods of deflation, albeit very short ones—like in the post-mortgage crisis malaise in 2009. It’s rare—but it happens.

Class dis, uh…‘missed.