Inflation vs deflation

I find it a bit tiresome when people leap in and start pontificating about supposed certainties that some of the best minds in the business aren’t sure about, so here’s an easy way of helping us keep track of the single most important economic question of the day. If you’re an inflationist, then provide everyone with one definite consequence of the inflation you expect. If you’re a deflationist, tell us one obvious consequence of future deflation.

For example, if there is inflation, I expect the US dollar price of gold to increase to beyond its inflation-corrected 1980 peak of $2,325. If there is deflation, I expect total credit market debt outstanding to shrink and total credit market debt/GDP to fall below 200 percent. If everyone who has an informed opinion on the matter contributes and we all agree upon the indicators, we’ll have a nice, detailed list of checkboxes to contemplate as the situation unfolds.

My feeling is that the initial indicators have favored the deflationary scenario, since I would have expected much higher CPI and gold prices with the explosion in M2 and interest rates at effective zero.

And for the pedantic, inflation here is defined as “a general increase in the money supply. Often confused with its primary symptom, an increase in the general level of prices. The Consumer Price Index is the primary statistical measure of price levels, not inflation per se.” Deflation, obviously, is a general decrease in the money supply.