After three-plus decades of credit inflation that flowed (mostly) into asset prices, discussing inflation/deflation is difficult.
Since the bond market lows in 1981, every dollar borrowed (by anyone, especially Uncle Sam) and spent performed an amazing feat: At least two dollars of "wealth" were created, the first as a dollar spent cascading (at monetary velocity) through the "GDP-producing" economy while a second dollar, the IOU, was counted as an asset in the bond market. This magic-money-machine continued as long as collective trust in the veracity of those IOU's (which are nothing but promises of future cash flows) remained high.
Are we not awash in fantasy-level promises of future cash flow? This blog details some of the pension excesses, unpayable under any fantastic assumption (IL's 3% COLA in perpetuity is an exercise in innumeracy, for example, when looking at pensions.)
Back in 1981 the existing amount of debt was a puddle in comparison to today's Bond Ocean. While the bond bull market drove debt service lower, people flooded more debt into that ocean, but when rates hit zero, there was nowhere to go but up. The capital gains on debt as rates fell were applied to a pond of IOU's. Now that it's an ocean of them, the promised collapse in capital value as rates rise is a mathematical axiom, a veritable Mount Vesuvius now smoking and rumbling. It all rests on nothing but mass psychology, of mass trust (pathological trust, that is.) The amount of debt extant is an abstraction far beyond the minds of men to grasp. There is no limit to the amount of an intangible asset that can be floated into a bull market; the law of supply and demand simply does not apply. The amount of debt (and its yield) is nothing more than a fad or a fashion...herd-level cognition that has nothing to do with reason or logic, and for which industrial-scale rationalizations arose.
I submit this is the economic/financial side of the Leftist coin. Leftism is for all practical purposes a theology of wish-fulfillment, the notion that political systems can fine-tune every aspect of life to eliminate all that is deemed undesirable. It is pure, unadulterated belief in unreality, of a world without limits, a world of unlimited resources. All that matters is the fad of the day. That this collective mindset has been rallying since the Protestant Reformation hides just how odd is the entire project. I think the last 50 years are the "blow off top" of this entire long-lived fashion in groupthink. Debt could grow to orbital levels, genetics don't dictate any aspect of human condition, Chinese labor could make everything Americans want, while Americans pawn their entire nation to buy the trinkets, even as American jobs moved from making final goods from natural resources to pushing intangible "assets" from one electronic account to another. And several industries (most notably the economics profession) arose to "'es-splain" why all this makes perfect sense.
Is this incorrect?