[quote=pencilneck]Doug Noland’s latest puts a good perspective on this inflation/deflation discussion:
“And I find myself increasingly frustrated by the ongoing “inflation vs. deflation debate.” With today’s low level of consumer price inflation, those arguing that deflationary forces are the paramount systemic risk now dominate policy dialogue. Most tend to be inflationists. Most argue for additional stimulus and see little risk in such activist policymaking.
I see risks altogether differently. We are in the late-phase of a multi-decade historic Credit Bubble. The greatest risk at this point is that massive issuance of non-productive governmental debt foments a crisis of confidence at the very heart of our monetary system. The top priority must be to ensure that such a devastating outcome is avoided – and at significant unavoidable cost. It is imperative that we as a nation come to the recognition that real financial and economic pain must be endured to protect the long-term viability of our monetary system. The inflation rate is not the key issue. And efforts to try to inflate our way out of structural debt problems are a lost cause. We must instead move forcefully to rein in our deficits and avoid further debt monetization in order to protect the soundness of our money and Credit – or else risk a financial crash.”
Yes, Noland is fantastic imho. Though in this case I think he is more describing the fight between the Krugman types and the austerity types, basically saying that they are arguing over the wrong thing (ie which of their plans will help economic growth better, when in fact the actual topic should be, how do we prevent a crisis in our currency and debt?)
That said, the inflation vs deflation debate is for the most part a waste of time because the participants are usually using a different vocabulary from one another and it’s all cross-talk.
