Swan, over the past few years, I don't think that anyone views the wild price swings of crude are a consequence of inflation or deflation. Not when they were at $147, not when they were at $35, and not where they are now.
Moreover, given worldwide demand decline, historic oversupply, I don't believe that the existing price is a true function of demand and supply.
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There has been so much misinformation, so many political and ideological agendas confounding the inflation/deflation debate that it's nearly impossible to discuss it rationally. I'll simply state the following as facts:
[1] The US and the world are still in a contractionary phase. In that phase are built-in time lags, with some effects occurring immediately, and others taking years to become evident.
[2] As posted many times, many US problems were latent, until this crisis. Two of these problems were
- (2A) Steady accumulation of debt, such that it prejudiced future ability to pay for entitlement programs, or indeed, to pay off debt itself.
- (2B) Transformation of the US into a credit-based economy, with attributes of false growth masking relative economic decline: the illusion of prosperity and economic strength
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However, policy actions to prevent global economic crash have universally been fiat-money, and interventionist in nature - because that is the prevalent global order. Many who opine on the matter make no distinction between crash avoidance, and the resolution of long-term structural problems.
In the present, it appears that crash avoidance has been a success - despite the fact that some steps were improvised, and could have been done both differently and better... fireman always add water damage to fire damage. However, global contraction continues, and contraction is deflationary - with built-in time lags. A crash would have meant instant deflation on a global scale.
The same applies to inflation. Despite issues like monetization of debt, inflation is a latent problem, in the future. Right now the big concern is to slow deflation, and it seems to be working. But lending is now severely constrained, credit is tight, and CBs and governments worldwide have struggled to get money to faltering economies by going around locked-up banking systems.
The fact is that barring some disruptive event (war, a USD run, pandemic, etc) inflation won't rear its head until the US and global economies stabilize... and that point is still a long way ahead. Almost every economist (not blogger) I've read acknowledges the latent inflationary risk - globally, not just in the US - but also recognizes that it's a future risk, not a present one.
In the view of interventionist fiat-money economists, crash avoidance with deficit spending was well worth the additional inflationary risk.
That said, we all recognize it's just the prevailing view among those guiding world economies, and that economics, the "dismal science" is no "science" at all.
Jim
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