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While you are technically correct about the push towards deflation he still makes a strong argument for inflation. When the government debt is big enough they will have to monetize it. It’s the cowards way out since they seem so incapable of making real cuts. Unemployment won’t make much impact when the price of full employment pales in comparison to the debt.

Right now we seem to have both and it’s a mixed bag but nobody has ever dealt with numbers like this. It is incomprehensible. It was unthinkable to contemplate these numbers a few decades ago and that by itself is inflation.

You can’t have inflation with high unemployment.

Where were you in the 1970s? Or did you forget your /sarc tag?

Are they really teaching such nonsense anymore? I suppose you could create a model that suggests such a thing, but history clearly shows that it can happen.

The economists had to invent a new term for this - Stagflation, coined in 1965.

So for 45 years, the economists have known that such a thing is possible.

"You can’t have inflation with high unemployment. When you lose your job expenses are cut. Deflation kicks in and no matter how low the price goes no one buys. No job and huge debt = disaster."

Keynes lied, and the economy died. Inflation is supposed to cure unemployment by lowering real wages. Of course, it really doesn't work like that because increases in wages and CPI always lag PPI when loose money is used to try and gin-up GDP numbers. That's why things in the US got as bad as they did back in the 1970s.

The inflation we're experiencing is a monetary phenomenon combined with rising GLOBAL demand. It's a small world after all. Even smaller now that the Chinese are putting more new automobiles on the road on an annual basis than we are.

What's been happening for the last decade plus is that the basic inputs used to produce literally everything are going through the roof. US consumer demand for end products is a non-factor. When prices for inputs go up, consumer prices must follow or those products cannot be produced and sold at a profit. If consumer prices cannot rise due to slack demand, then margins start to collapse and businesses start laying off. It's textbook stagflation and supply shock from an Austrian point-of-view.

Deflation's not kicking in because there's too much liquidity sloshing around in the upper end of commodity markets, and there's too much added demand outside our borders thanks to the recent economic expansion around the Pacific.

Some modest deflation in basic inputs would be welcome relief for our manufacturing sector, but the Fed are seemingly clueless about the real-world reprocussions of their loose-money policy and are actively preventing recovery by pricing us out of input markets. Holding PPI as close to 0% as possible should be the Fed's only mandate.