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There are several ways to mask inflation, I think. If you are offshoring major parts of your industry to low-cost countries, you will not notice the inflation in your currency when the costs are dropping.

Also, if you are in an economic downturn and people are out of work, demand drops radically which causes prices to drop, thus again masking inflation of the currency. Demand can cause prices to rise or fall quite independent of inflation.

Increased automation of production processes have helped to mask inflation for a long time, as well. Again, falling prices due to technology help to mask the erosion of the currency itself.

Then, finally, if the currency you are comparing to is itself in crisis and losing value, you may not see the inflation in your own currency.

An economy has several moving parts (actually, millions of them, technically). Still, its funny to hear them tell us there is no inflation while considering the elimination of dollar bills and small coins because they aren’t worth anything anymore.

That, in fact, seems to be what has happened over the past few years. A combination of a growing fiscal deficit and an accommodative monetary policy have helped prevent the housing slump and financial crisis from depressing prices generally. This is entirely in keeping with the Austrian approach to economics.

Lately there have been two opposing forces at work that can result in a cancelling effect. In a recession, there is a natural tendency for average prices and average wages to decrease. And when government inflates the money supply, there is a tendency for prices and wages to increase.

Recovery from recession is speeded up when prices and wages decrease because they lower costs which helps increase rate of profit which increases the incentive to invest more.When inflation stops prices and wages from falling, recovery is slowed down.

While Austrian economics teaches that nominal prices are related to the money supply, they never pretend to predict where this effect will show up.

When Alan Greenspan held interest rates abnormally low in the 1980s, who could have predicted that money would have funded a bubble in tech stocks? Or after the 9/11, who could have predicted that the money printing of the Fed would cause a housing price bubble? Indeed, when we were well into both bubbles, how many Keynesian economists accepted any suggestion that we were in a bubble that was unsustainable?

Thanks to the Austrians, I now know that an economy CANNOT function for long when interest rates are suppressed to zero. And when the Federal Reserve prints money out of thin air to buy 50% of the federal spending, it is indeed bound to cause higher prices, even though nobody at this time can predict where or when.

"In other words, Austrians will insist that any increase in the money supply is inflation—as a matter of definition. But Austrian economics does not insist that this kind of inflation necessarily results in higher prices."

In other words, either Austrians don't understand Austrian economics so they made bad predictions, OR Austrians are revising Austrian economics because their predictions were so horrible.