The Second Hand Unwinds

Sometimes you picture me
I'm walking too far ahead
You're calling to me
I can't hear what you've said
--Cyndi Lauper

The video near the top of this page offers a decent description of the inflation vs deflation duel currently underway. To be sure, Mandel and Coy missed the lead up to our current problem by a country mile, so their credibility isn't all that great.

But the argument that increased money and credit supply by the Fed et al is being offset by a decrease in money and credit demand among individuals interested in saving and paying down debt is reasonable.

However, their 'bottom line' on what the Fed and policymakers should do about this situation--i.e., stay the course, create all the stimulus we need, and avoid deflation at all costs--is wrongheaded. Deflation is simply the market's response to wring out inflationary excesses. A cleansing process.

Morever, expecting the Fed et al to retract excess stimulus once things 'turn around' is pure folly. Bureaucrats chronically lag reaction-prompting stimuli.