Even the fully fledged economists are arguing this one.
Inflation is defined as; a loss of purchasing power.
Deflation is defined as an increase in purchasing power.
So here is the situation, outside of America, the US$ is purchasing less today, than it did. You could purchase Gold, Oil, far cheaper 2yrs ago, than you can today, thus our definition of inflation [outside of the US] is fulfilled.
Within the US, we have a mixture of Inflation and Deflation.
Deflation; you can buy stocks [DJIA] cheaper today, than you could 4mths ago. You can buy a house, cheaper today, than you could 6mths ago.
Inflation; it is more expensive to buy petrol today, than it was 6mths ago. It is more expensive to purchase your groceries today, than it was 1yr ago.
The reasons for this are fairly straightforward; the US$ is losing value.
Easy to see, the Dollar has headed down, losing value from the peak in 2002. Meanwhile, the prices of commodities have been rising;
Meanwhile the Treasury has not been printing money, thus the usual suspect is innocent in this case;
Money supply M2, is contracting.
The source of the “Deflation” is the extreme credit contraction. This has been generated from the Financial system that is currently capital impaired, or insolvent, due to poor lending standards causing excessive credit creation, that is now driving the deflation in financial assets, that creates deflation, or increased purchasing power for financial assets.
