-Though, their basic definitions are the same, deflationists expand their definition of money
-Power of the bond market to curtail serious “printing”
-effectiveness of printing
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That is an excellent summary of the differing assumptions between me and the long-term deflationists. As you might expect given where I land on this issue, I think their assumptions are incorrect.
1. They have actually radically changed the definition of money to include all money AND credit. Money and credit are two completely different factors and summing them into one monolithic statistic makes no sense (not to mention hopelessly muddying up the debate by unilaterally fabricating new definitions of terms).
2. So far, the Fed has printed about a trillion and a half dollars, and the bond market has not objected at all.
3. If the Fed monetizes assets, that can get money into the real economy (eg, if it buys Treasuries, that gives new money to the govt which then spends it into the economy). Also, as with #2, the data says otherwise: they printed money in 09 and the consumer price deflation ended. Printing money isn’t “effective” in terms of making things better, but it can most certainly be “effective” in terms of ending deflation.
