"You need to investigate the logic of price inflation, which rests on the logic– mostly political – of monetary inflation," writes Gary North at LewRockwell.com .

"Those who predict price deflation argue that the politics of monetary inflation will be overcome by the size of the debt. The debt will become so gargantuan that the central banks will not be able to prevent massive bankruptcies, default, and bank runs. There will be a rush for liquidity.Prices will fall.

I do not think this argument is correct. I have offered my reasons elsewhere. But the logic of deflation rests on an assumption: the triumph of free market leverage over central bank monetary inflation and the monetization of debt. Deflationists do not argue that central banks will adopt a policy of deflation.

Inflationists argue that central bankers will adopt policies of monetary inflation,and these policies will be successful in preventing the collapse of banking and money.

I am in the camp of the inflationists. I regard today's stable consumer prices as the joint product of central bank monetary inflation to save Fannie Mae and Freddie Mac and thereby save the largest banks, coupled with the individual, uncoordinated decisions of commercial bankers to deposit their banks' excess money with the Federal Reserve, thereby sterilizing the more than doubled monetary base."

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