Economists spend so much time arguing over whether we have inflation OR deflation, when it is obvious we have both. Lets remember what inflation is: "an increase in the money supply, or a decrease in the level of goods and services that can be bought with the money supply. When relatively more money chases relatively less goods and services, rising prices are the inevitable result"
There is inflation in the housing market. There WAS inflation in the stockmarket. You could argue that there still is. The Fed increases liquidity by pumping money into the system. That act is inflationary. The stock market fell, that effect is deflationary. However valuations keep going up, which indicates market inefficiency. Is that deflationary? Did the Fed increase liquidity to pump up the stock market, the housing market, or the economy? Its obvious where the money went. Could the Fed have changed that? Maybe not. But they should have tried at least. The consumer is becoming poorer. Debts levels are too high. Wall St shonks have stolen the publics retirement funds. The public is faced with nothing but declining asset values. This is deflationary.
The only way the economy will get better is if the consumer starts spending. Why would they spend when they have a mountain of debt, declining wealth and their dollar just doesnt buy what it used to?
Lets say you are Joe Sixpack. You worked your ass off your entire life to save a million bucks. But then the economy gets into trouble, and so the Fed starts pulling $1m notes from out of its ass and every new dollar they issue decreases the buying power of the million bucks you saved hard for. Would you be happy bout that? I wouldnt.
The Fed is putting a band-aid on a shotgun wound which is festering by the day.
