Suppose you go to a doctor. You are in pain and you tell him that you feel like you are going to die. He takes your temperature, and sees that it is a perfectly normal 98.6F. He tells you to go home, you must be fine. He does not seem to be aware of any problem that can cause pain but not a fever (e.g. a broken vertebra, cancer, or bleeding). He is a quack.
It’s a good thing that real doctors have many diagnostics and indicators. They are not limited to just body temperature.
Let’s turn our attention to the monetary system. The quacks focus their attention on prices. The rate of change of prices—which they improperly define as inflation—is the monetary equivalent of body temperature in medicine. In some cases, it’s an important part of making a diagnosis.
And it is far from the only indicator.
If prices are like temperature, then what is analogous to the patient’s pulse? Interest rates. And interest rates have been falling for 34 years.
Is there a doctor in the house? Should we be worried?