Is inflation or deflation a greater threat to the world economy? Should policymakers focus more on structural adjustments or aggregate demand?Prominent economists are invited to discuss the topic. I can be prominent, but I do not want to be an economist. But here is my opinion.
Neither monetary inflation, nor monetary deflation is a risk, it seldom is. By the time money is risky it is no longer money. Money and finance did not cause this recession, though if we keep listening to the Money Illusionists it may soon be a cause. Nor did government directly cause this depression, but government may make it much worse if we listen to the Fiscal Illusionists.
The proper economic response is for economic agents to solve their economic constraints (shortages), which up to now have not been government or money. Faking us out with attempts at illusion, fiscal or monetary, will not work.
Adam Posen has the proper response to the folly of trying to fake out the Japanese with Money Illusion.
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