Mujakic says the relief comes because inflation is slightly lower than expected, which was 2.9 percent in July, compared to June. “If you look at core inflation; 3.2 per cent and the same high as in June. People are now pretending that nothing is wrong and that inflation will definitely go to 2 per cent. There is no reason to believe that, so I honestly don’t understand the relief.

Will investors really like it?

People wanted to see this as a figure that would not prevent the central bank from cutting interest rates when the interest rate committee meets on September 18. That’s what the market has been waiting for for weeks: the last hurdles to clear. Yesterday’s numbers weren’t too bad, and that clears the last hurdle. So interest rates will come down in September and the market is very happy.

What accounts for this small increase?

Rents in the US have largely contributed to high inflation in the US. It’s all very fragile and the inflation problem in the US is certainly not solved.

The central bank’s target has always been a 2 percent global inflation rate. Why that number?

We live in a world where central banks aim for prices to rise every year. If you think about it, it’s completely unnatural. The natural tendency of an economy is for prices to fall because people are always able to come up with new inventions. With each new invention, each new wave of technology, we can continue to do everything we did before, but more cheaply.

It is the natural tendency of an economy to lower prices that you saw so clearly after the first and second industrial revolutions. We’ve only had 20, 25 years of falling prices and the IMF, among others, concluded that the rise in prosperity in those periods was unprecedented.

That makes perfect sense, right?

Yes, because if prices fall thanks to innovation, that means wages will rise in real terms. So you get the same salary, but you spend your money cheaper. Then everyone will be prosperous. In fact, our only exception to that rule was in the Third Industrial Revolution, which began with the first e-mail in 1971 — exactly 53 years ago. What we saw after that was fifty years of constant inflation. It is very unnatural.

What is the difference between the three industrial revolutions?

The difference between the first, second, and third is that with the first two, we don’t have central banks deliberately raising prices. 53 years ago today, Americans decided to decouple the dollar from gold, and that has everything to do with what I said about structural inflation.

Because?

This is because we have started to adopt a type of economic model in the West in which we increasingly rely on increasing credit for our economic growth. And what is one’s worst enemy in debt? That is price fall, deflation. Who is the best friend of someone with high debt? That is inflation and it explains why our central bankers are pursuing something even more unnatural, namely that prices must rise at all costs.

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