which to believe in ....
I wish I knew.
Problem is, the terms deflation and inflation can honestly be defined differently and so understanding just where they're coming from and what definitions they're using goes a long way to deciphering it all.
You've lived with mild inflation for practically your entire life if you were born after WWII, with one period of high inflation set off by the Arab oil embargo and the sharp recessions that followed. Even this was not the so-called hyperinflation, that term that gets bandied about so carelessly.
The US dollar has never experienced it. Confederate currency did, as did currencies introduced during the American Revolution. The value fell to practical worthlessness. Faith in these currencies was short lived, it was overissued creating inflation, then loss of confidence in the currencies led to abandonment of it, which further drove the value down, heavily devaluing it, which to the unfortunate holders of the currency was indistinguishable from the dreaded hyperinflation.
Catastrophic deflation, we've experienced that with the dollar, during the Great Depression. Demand fell, prices fell, debt was defaulted upon, causing a repeat of the cycle. It got to the point that nearly everything was very inexpensive, but few could afford even that. The economy grinds practically to a halt, even solvent businesses beginnhaving difficulty due to loss of demand. It's not a good thing, despite all the wishful thinking on the part of those who envision themselves being the lucky ones who manage to hang onto a mountain of cash, then swooping in and buying up assets for a song. Bank failures tended to put the kibosh on that for people of more modest means.
Weimar Germany is the prime example of hyperinflation, currency being burned for heat, wheelbarrow loads to buy groceries, I'm sure you've heard or read about it. Pretty shortlived, less than a year under those very severe conditions. The means of surviving that at the time was to convert to another more stable currency.
In more modern times, there's the nightmare that beset the former Rhodesia, now known as Zimbabwe. Malfeasance, malice, incompetence, you name it, it's a descent into chaos and an economic dark age for those unable to escape or at least secure their savings elsewhere.
All this rambling on my part I guess is to try and illustrate that you don't have to choose one or the other, to “believe in” one or the other. They both happen to unstable currencies. That instability can have a variety of sources or causes, even multiple ones. You can have one followed by the other in fairly rapid succession, which happened in the Weimar Republic.
Observe, see what is actually happening. That will tell you what others fear, at least. We have our own government plastering the world with our currency, the dollar. That massive increase in the money supply is the classic definition of inflation. We also have, however, a massive collapse of certain financial instruments as well as defaults. This is deflationary because it removes real money from circulation.
These two forces have been whipsawing practically every economy in the world since late summer, 2007 when it all began. Commodity bubbles, rapidly spiking and collapsing just as rapidly, have been the only symptom thus far of a massive increase in the money supply. This is an attempt at staving off a disastrous deflation event, all the more dire now because debt is so much more widespread. The maw of this thing is huge and it appears insatiable thus far.
Thus far. There will come a time when various central banks overshoot the mark, though. So, I've been maintaining that we're having the effect of both simultaneously. One or the other hasn't won out.
The day will come when one of them does, hence all the debate. We're talking about governments here. Restraint is not characteristic of government in the modern era. Austerity? Who would actually mount an austerity program and hold to it? Germany?
This is the mess we're in.
Hyper-inflation is triggered when people begin to "feel" that their money is shrinking in purchasing power. By all rights, we'd be in hyper-inflation now given the amount of money Bernanke's poured into the system. But confidence is still high.
Our fiat money system is based on nothing but faith. Hard assets [land, gold, etc.], however, are real. That's what we should believe in.
LOL, buy now with credit and repay with inflated dollars?????????????
Both!!!...Just get ahead of the curve!