Authored by Brandon Smith via Alt-Market.us

In a system dominated by Keynesian economics the word “deflation” is considered taboo; like saying Donald Trump’s name out loud in a crowded Seattle yoga studio. The screeching reaction you will get is rarely worth the effort of arguing the point. Every element of modern financial policy is designed to prevent a deflationary event. Every central bank policy is designed to artificially drag the economy out of deflation using whatever fiat stimulus is necessary.

Of course, deflation is not always a bad thing. It’s the harsh tasting medicine sometimes needed to correct the many problems caused by bad investments, corporate fraud, consumer debt addiction, government interference in markets, etc. We saw this during the crash of 2008, but the Federal Reserve refused to let the treatment run its course.

The US, like many countries, has become disconnected from the concept of financial consequences. But when America’s massive system dodges accountability, the cost to future generations can be immense.

So now we’re stuck with 17 years of persistent monetary intervention and the inevitable stagflationary crisis it created. The fact that Keynesians like Paul Krugman, Janet Yellen and Ben Bernanke downplayed or outright denied the existence of the inflationary threat shows, at the very least, that they know inflation is a bad thing for the general public (otherwise, why would they try to hide it?).

They denied reality so hard it made them look stupid when 2022 hit the US with a 9.1% CPI rate. The consequences of stimulus driven policies are now undeniable and the Keynesian “experts” have been proven useless, but this doesn’t mean anything is going to change for the better.

My ongoing question with the return of Donald Trump to the White House has been this: How are the banks going to pull the rug out from under this administration? Will it be a deflationary crisis, or an even bigger inflationary crisis?

As I noted last month in my article “Inflection Point: US Government Shutdown And Strange Economic Signals”, gold and silver prices seem to be on the verge of going parabolic (beyond the price explosion we’ve already seen this year), which indicates incoming inflationary pressures. Or, at the very least, a global expectation among investors and central banks of a crisis event which will precipitate further inflation.

I suspect this is partially due to the monolithic interest payments that the US government is required to make on existing debt ($250 billion every 3 months currently). Central banks and investors are snapping up gold and silver, perhaps with the expectation that US debt will become unstable, thus affecting dollar value or triggering a new round of QE.

Furthermore, despite Federal Reserve intervention in interest rates, consumer spending has not significantly slowed down and debt borrowing continues to climb to record highs. CPI growth has slowed dramatically from the Biden era, but prices have not dropped enough to give relief to average Americans. If the Fed’s goal in jacking up interest rates was to slow demand, they failed miserably.

As I’ve noted in the past, the central bank had to hike interest rates to over 20% in the early 1980s to finally end the decade long stagflation crisis – We didn’t come anywhere close to that post-pandemic. Meaning, the Fed put a band aid on an inflationary gunshot wound.

But is deflation just around the corner? There are some signs that this is happening. For example, job availability has dropped by 500,000 openings in the past year, and keep in mind around 30% of all advertised employment opportunities are actually “ghost jobs” that don’t actually exist.

There have been increases in job layoffs in 2025, but 27% of those are connected to DOGE cuts to government bureaucracy. White collar jobs have seen a increase in layoffs of around 19% for the year.

The US national debt increased by $2.2 trillion in 2025. Consumer credit debt is increasing by around $190 billion every quarter. Total household debt has hit $18.5 trillion. Eventually, the debt expansion is going to drag down consumption, but this doesn’t seem to be happening yet.

There hasn’t been a noticeable slowdown in retail spending, nor in credit borrowing. Prices remain significantly higher compared to before the pandemic despite softening of the CPI. The elements needed for deflation to pull prices down just don’t exist.

I continue to suspect that a deflationary event is coming, but I think this will only happen after another round of inflation hits the economy. If the Fed cuts rates to the point that CPI spikes sharply again (which won’t take long), then rising prices will ultimately hobble consumer spending. If they don’t, then the Fed will hike rates well beyond recent highs, just as they did in the 1980s.

It’s the Catch-22 trap that I have been talking about for years and it’s not going away. The choice is really up to the Fed – To increase interest rates far beyond what they did in the past three years, or stimulate. In other words, the roller coaster starts in 2026 as the central bank continues to cut. Watch for returning instability in the CPI in the summer and fall.

Trump’s tariffs, if they are still in effect, will likely be blamed despite the fact that tariffs have avoided the kind of cost crisis that many critics were predicting. How did this happen? Well, because the critics don’t take into account the massive mark-up from manufacturers overseas to retail prices on the shelf.

Prices on many goods are jacked up by 250% on average once they reach the US. Some apparel items see a markup of over 900% before they hit the shelf. The price of labor and materials in Asia is exceedingly low, and the charges on final products in America are exceedingly high. This is why most international corporations can eat the tariff taxes without much trouble to consumers.

Tariffs are estimated to have caused an increase in CPI of 0.7% since they began according to Harvard research data; a negligible amount compared to the disastrous predictions of many mainstream economists.

That said, inflation continues to loom and tariffs make for a useful scapegoat simply because most people don’t understand them. There has been no deflationary correction, not since 2008 and not since the pandemic stimulus. Which means high demand has not been quelled and savings are not increasing (the US personal savings rate declined to record lows in 2024-2025). Excess dollars are still increasing in circulation and FRED M2 continues to climb. The system never took its medicine.

This means that as the central bank returns to lower rates, borrowing will explode to even higher levels.  Inflation will resurface, likely by the third quarter of 2026 if the Fed continues to cut interest rates into next year.

The Trump Administration is taking measures that could help mitigate prices. Mass deportations will certainly reduce domestic demand for goods and housing, which means more supply and falling prices. But this won’t happen at the kind of pace we need unless Trump finds a way to at least double the current annual deportations. The effects will be cumulative and will take years to affect markets.

Overall, I don’t see a way to escape more inflation in the near term without dramatic changes to economic conditions, or a historic move by the Federal Reserve to hike interest rates to levels not seen since the stagflation crisis 50 years ago.

A few years ago a propaganda narrative was launched by Democrat leaders and the left-wing media asserting that conservative red states are the greatest source of criminal activity in the US.  The narrative was designed to misdirect the public, distracting from the ongoing problem of progressive soft-on-crime policies which help violent offenders stay out of prison while putting the population at risk.    

In reality, red states only have a crime problem because of blue cities.  Democrat controlled cities suffer the most criminal activity by far.  Data shows that 27 out of 30 of the most violent cities in the US are Democrat run. The leftist propaganda backfired, leading to wider discussions on blue city decay and liberal delusions that crime is a “product of society” rather than a product of inherent psychopathy. 

The situation is far worse than reports indicate. For many years evidence has been mounting that reveals a pattern of suppression when it comes to blue city crime stats.  One city that has been placed under a microscope is Washington DC – A new report from the House Oversight Committee alleges former D.C. Police Chief Pamela Smith played a considerable role in the overall Democrat effort to hide true crime stats from the general public.

The report, based on evidence and testimony collected over the course of the past several months, alleges that Smith pressured officers to manipulate crime data. The committee released the report on Sunday, less than a week after Smith announced she was stepping down.  

DC crime stats have been under suspicion for many years, but suppression did not come to light until Donald Trump initiated a crackdown on DC crime, deploying the National Guard to the city leading to an immediate drop in reported violence.  DC police officials claimed that there was no crime problem, boasting of a 30-year-low in murders and assaults.  This claim is now under dispute after the House Oversight report.

The report’s key findings include:

1)  Chief Smith used a pressure campaign against staff which led to inaccurate crime data. Testimony from MPD commanders revealed that Chief Smith prioritized lowering publicly reported crime numbers over reducing actual crime, placing intense pressure on district commanders to produce low crime statistics by any means necessary.

2)  Commanders also testified that Chief Smith pushed for more frequent use of lesser, intermediate charges – which are not publicly reported – and required certain crimes to be reviewed by her office, actions that together amounted to manipulating crime data to present the illusion of lower crime in the District. 

3)  Chief Smith punished and removed officers for reporting accurate crime numbers and fostered a toxic culture. Commanders described a culture of fear and stated that Chief Smith propagated an ecosystem of retaliation and toxicity. Testimony reveals commanders were berated for reporting rising crime and faced retaliation.  

4)  D.C. crime statistics are still at risk of manipulation.  Crime classifications – which affect reported MPD crime data – have been and are still at risk of being artificially reduced to manipulate crime statistics at the expense of public safety, even after Chief Smith’s abrupt resignation. 

5)  MPD commanders also confirmed that President Trump’s federal law enforcement surge in D.C. has been effective in lowering crime.  

While Smith has not yet publicly responded to the report, she’s previously denied allegations of manipulating crime data, saying the investigation did not play a factor into her decision to step down at the end of the year.  Democrat Mayor Muriel Bowser also released a statement Monday, writing in part that “the interim report betrays its bias from the outset, admitting that it was rushed to release.”

This argument doesn’t address the damning testimony from transcribed interviews with the commanders of all seven D.C. patrol districts and a former commander currently on suspended leave.  The Democrat position is, as usual, that everyone else is lying and only they are telling the truth.  When faced with questions about the testimonies, Mayor Bowser asserted that the Police Chief’s “management style” was none of Congress’ business.  

This is the kind of blatant corruption that is suffocating many US cities.  

According to current crime stats from the Metropolitan Police Department, since Trump’s federal law enforcement surge started in August, total violent crime is down 26%. Homicides are down 12% and carjackings 37%.  

Authored by Andrew Moran via The Epoch Times (emphasis ours),

Microcars could be driving on a street near you.

The affordability issue has also extended to the car market. At a time when the average price of a brand-new automobile is almost $50,000, the White House is seeking to offer motorists other affordable options.

Honda Motor’s new N-BOX mini-vehicles at the company’s headquarters in Tokyo on Aug. 31, 2017. Kazuhiro Nogi/AFP via Getty Images

Japan may have inspired President Donald Trump’s latest decision to allow U.S. manufacturers to produce tiny automobiles—also known as kei cars.

Administration Actions

Trump, speaking at a White House event on Dec. 3, expressed admiration for tiny cars after seeing them in Japan, comparing these models to the classic Volkswagen Beetle.

“They’re very small; they’re really cute,” Trump told reporters. “And everyone seems to think they’re good, but you’re not allowed to build them.”

He confirmed that he authorized Transportation Secretary Sean Duffy to “immediately approve the production” of these smaller vehicles, which are common throughout Malaysia and South Korea.

“So, you’ll be able to buy [them],” the president said.

In a Dec. 5 Truth Social post, Trump reiterated the charm of these miniature cars.

“Manufacturers have long wanted to do this, just like they are so successfully built in other countries. They can be propelled by gasoline, electric, or hybrid,” the president wrote.

“These cars of the very near future are inexpensive, safe, fuel efficient and, quite simply, amazing!!! Start building them now!”

In a Dec. 4 interview with CNBC’s “Squawk Box,” Duffy stated that if there is market support for low-cost microcars, he wants to afford U.S. manufacturers the opportunity to satisfy consumer demand.

While they might not be functional on freeways, the secretary noted that they could work in urban settings.

“If that’s where you drive, it could be a great solution for you,” he said. “And, by the way, much more affordable than other options that are on the market today.”

Terminating CAFE Standards

The president’s comments came as he moved to dismantle his predecessor’s fuel‑economy rules, formally scrapping the Biden administration’s Corporate Average Fuel Economy (CAFE) standards.

The original program required automakers to average 50.4 miles per gallon by 2031, but Trump’s rollback lowers the target to 34.5 miles per gallon over the next six years.

The White House estimates that the change will trim at least $1,000 from sticker prices and deliver about $109 billion in consumer savings over the next five years.

Driving a Kei Car

Emerging in the late 1940s and ‘50s, tiny automobiles—kei cars—were created to provide low-cost personal transportation during Japan’s postwar reconstruction. Their compact size suited the era’s infrastructure, when most roads were narrow, winding, and frequently unpaved.

The federal government does not explicitly ban Japanese-style microcars. However, regulatory exclusions effectively prevented automakers from producing these types of vehicles, forcing them to manufacture larger, heavier cars.

People cross a street under the hot sun in Tokyo on June 20, 2025. Kazuhiro Nogi/AFP via Getty Images

Since the 1970s, the United States has implemented modern federal crash-safety and highway-safety standards under the Federal Motor Vehicle Safety Standards. This includes airbags, crash-test performance, side-impact protection, and structural strength.

Kei cars—designed with small dimensions and engines—cannot comply with these standards without adding weight and size, ultimately undermining the very concept.

‘Game Changer’ for US Automakers

The president’s public support and policy actions regarding kei cars are a “game changer,” said Lauren Fix, a sector analyst and industry expert at Car Coach Reports.

“This is not an overnight process, but the tooling could be shipped to the U.S. and produced within a year,” Fix told The Epoch Times.

One automaker is already putting the pedal to the metal to see if Americans want smaller cars.

Chrysler parent Stellantis said on Dec. 8 that it will begin offering an all-electric small car called the Fiat Topolino—translated to “little mouse”—in the United States in 2026.

Fiat CEO Olivier François stopped short of providing more information, but he said in a statement that more details would be shared in 2026.

“The Fiat Topolino, our small, joyful, colorful car that is now everywhere in Europe, has made several appearances in the U.S. over the past year, including last month at the LA Auto Show, where it’s creating tremendous excitement among consumers,” François said in the statement.

“So much so that I’m happy to share that we’ll be bringing the Fiat Topolino to the U.S., with more details to come next year.”

Trump’s enthusiasm for tiny cars, meanwhile, could also lead to savings for families, according to Fix.

Affordability Versus Market Demand

In Japan, brand-new gasoline-powered kei cars range from $8,000 to $14,000—electric alternatives can run as high as $27,800.

Stellantis sells the Topolino in Europe for approximately $11,500.

By comparison, the average transaction price of a new automobile in the United States is almost $50,000, according to Cox Automotive’s Kelley Blue Book report, released on Dec. 9.

But availability and cost may not be enough to entice motorists to hop into a kei car anytime soon.

Two in five Americans say an SUV or crossover is their primary vehicle, according to YouGov survey data—and that preference is reflected clearly in the country’s best-selling models.

The U.S. auto market remains dominated by SUVs and pickup trucks—sedans account for a smaller share of domestic sales. In the first seven months of 2025, the top-selling cars have been the Ford F-Series, Chevrolet Silverado, Toyota RAV4, Honda CR-V, and Ram Trucks’ pickup.

If there is market demand, models such as Toyota’s Hilux pickup truck or the Fiat Topolino could be hitting U.S. streets in the coming years.

Travis Gillmore contributed to this report