In recent comments relating to the credit crisis in the USA there have been claims that the volume of broad money is collapsing and that this is going to bring on deflation which will need to be corrected with an increase in base money. I agree that an expansion of base money (ie printing currency) would be the correct cure for deflation but I dispute the notion that deflation is happening or is even likely to happen in the USA due to the current credit crisis. The current problem in the USA is a credit problem not a lack of liquidity.
Of course it could be that deflation would be happening except that the current expansion of base currency is already sufficient to neuralise the effect. Or it could be that the USA is in recession and output is falling so this offsets any decline in the money supply.
Now for some crowdsourcing. Can anybody out there in comment land find any price or index that indicates that the US dollar is increasing in value or buying power in any sort of uncharacteristically significant way. In short any price indicator that would suggest deflation is actually happening and the authorities are failing to pump out sufficient liquidity (ie not printing enough currency). I’m open to persuasion but I suspect that it is actually easier to find indicators pointing in the opposite direction.