Deflationists argue, 'Next year, in America!'They have been wrong...

Deflationists argue, 'Next year, in America!'They have been wrong every year since 1933.Inflationists argue, 'Next year, in America!'They have been correct every year since 1933.Gentlemen, place your bets! Those are the arguments Gary North presented in Inflation vs. Deflation Revisited. Monetary inflation produces price inflation. Monetary deflation produces price deflation. The most important money supply charts are found here. I implore you: click this link. http://snipurl. com/fedchartsClick the first three links on the page. If you refuse to do this, then you are not reallyinterested in the inflation vs. deflation debate. Several days later Gary North argues Price Deflation: A Great Idea With Low Probability. North states: 'You will find a statistic that the deflationists are either unaware of or prefer that their subscribers remain unaware of. Fact: in not one year since 1992 has the rate of price deflation in Japan fallen by as much as 1%. In half of the years, Japan experienced price inflation. In 2004, prices were flat. What does this tell us? It tells us that the deflationists have neither economic theory nor modern economic history on their side. They are really lousy psychologists, too.'To those articles let me briefly respond:I agree with North using Japan as the model since that is the model deflationists use. However, if inflation is the expanse of money and credit, then deflation is the opposite. 'Price Deflation' muddies the argument. There are reasons that prices could be falling that have nothing to do with deflation (productivity or huge harvest) and there are reasons prices could be rising that have noting to do with inflation (peak oil or supply disruptions or weather).The heart of the matter was a collapse of CREDIT that actually overwhelmed Japan even as the central bank tried to prevent it by injections of money. That collapse in credit caused Japan's mammoth asset bubbles to pop and housing prices to decline 18 straight years. It also caused the stock market to fall from 40,000 to 7,000 or so in the same time. North ignores declining credit for 60 straight months even as the Bank of Japan tried to prop things up via money supply. What about prices in Japan? Ojisan on the Motley FOOL writes: I lived in Japan from 1997-2000, and prices of many good and services definitely fell, including food items, haircuts, movie tickets, travel, subscriptions, etc. With services, most of the time it was difficult to see deflation from the outside because the listed prices didn't change much, but discounts and 'specials' became so common that getting less than the actual price was easy. In the case of subscriptions, for example, companies started throwing in freebies, like coupons for other stuff, household goods, etc., so the consumer was getting more for the same Yen. Of course, durable goods fell in price, but that's pretty much expected, especially on the tech side. Still, 100-yen shops (dollar stores) sprung up all over the place while I was there, with some pretty surprising stuff, most of it made in Korea, China, and Malaysia. Second hand shops, previously shunned by Japanese, became more popular, and more common, putting pressure on department stores, forcing constant sales. Finally, it became noticeable easier to haggle, even in the dept. stores. When I bought a video camera, for example, they threw in all kinds of extras to close the deal. So, technically, I paid the listed price, but not really. Ojisan Is it that unlikely that with rising unemployment in the wake of a housing crash that prices of movies, haircuts, and other services drops here too? I think not. If inflationists point out rising home prices as evidence of inflation, then they must point out home price declines as evidence of deflation if and when a housing bust happens. Inflation Monster CapturedFollowing is a snip about deflation in Japan from Inflation Monster Captured