New paradigms die hard. It took a looming global recession to convince wild-eyed optimists that old cycles are more reliable guides than new paradigms. Business cycles - from the smallest to the biggest - go through seven phases. Centuries of cumulative economic experience allow us to identify these stages more accurately than ever before. An economic cycle invariably starts with inflation. The previous cycle having ended - and the new one just began - the economic environment is as uncertain as can be. The fundamental component is the scarcity of goods and services (following recession or deflation) and the maladapted money supply. Too much money chases fewer commodities. The general price level rises. But this constant, ubiquitous, all pervasive rise (known as "inflation") is also the result of mass psychology. Households and firms compensate for the growing uncertainty (=growing risk) by raising prices. They have no idea what should the appropriate or optimal equilibrium price level be. Market signals are garbled by psychological noise. Everyone is trying to stay ahead of perceived economic threats and instabilities by raising the risk premiums that they demand from their clients. Consumers, on the other hand, are willing to pay more today because they are convinced that the price trend is unidirectional and irreversible: up. The psychological underpinnings and bearings of inflation have been studied deeply in the last few decades. It is the source of the uncertainty that remained obscure. My hypothesis is that the end of every economic cycle fosters this panicky uncertainty, which is monetarily reflected as inflation. In more technical terms, inflation is a market pathology, a market failure. Inflation disguises bad economic performance of firms and of the economy as a whole. "Paper" profits make up for operational losses. The incentives to innovate, modernize, and enhance productivity suffer. Economic yardsticks and benchmarks get distorted and do not allow for meaningful analysis of the performance of the economy. Inflation leads to technological and economic stagnation. Plants do not modernize, the financial aspects of the firm's operations are emphasized, the industrial and operational aspects de-emphasized and neglected. Economies are seized by the pathological economic condition known as "stagflation" - zero or negative growth, coupled with inflation. A sense of urgency and crisis sets in and clears the path towards the next, second phase.