If you read enough you can find persuasive arguments for both deflation and inflation. We've have clearly had an asset price deflation and people like Mish are convinced there will be a debt deflation, which would be bad. One bit of clarity about deflation is that prices coming down for certain types of items like computers and TVs due to efficiency and innovation is not really deflation. I'm pretty sure that cheaper TVs is not included when discussing deflation.
The case for inflation seems to be more of a looming threat as opposed to right here right now. The actual definition of inflation is increasing the money supply which we would expect to result in higher prices (more money chasing the same amount of goods). The numbers can be spun however the end user wants but while money has been printed and some debt monetized there does not appear to be more money hitting the street in the form of lending which might be why despite the many months of zero interest rates and quantitative easing we have not seen higher prices work their way into the government's inflation data. Point taken about the G manipulating the data but I think that data would at the very least capture the direction and trend even if not the magnitude.
If you read Peter Schiff or others like him they really pound the table with words like collapse and destruction in such a way as to make you think the end is nigh, as in tomorrow or the next day. The US has had these same types of systemic threats or problems for years and they have not torn the social fabric nor had the sort of widespread damage and panic that some tell us we should expect.
Given the dollar's role in the world it would seem very unlikely that there will ever be a violent dislocation. The damage to the dollar has been meaningful this decade but has not caused martial law, the collapse of our government or a complete breakdown of the country's infrastructure.
The US has become an increasingly less attractive investment destination and this trend will probably continue but it is not reverting to a third world country. The hyperbolic commentary from the various Schiffians does a great job making the bear case and explaining the problems (and to be clear there are a lot of problems) but I think the magnitude they call for is incorrect. Zimbabwe played almost no role in the world economic order when its problems started. It is right to expect headwinds galore in the US but not the USD going to zero, I actually read something yesterday that asked why can't the dollar go to zero.
The investment implication is simple and been repeated here often, more foreign exposure added slowly over time.
Tomorrow I'm flying to NYC for a scheduled appearance in CNBC for Friday and then on to Boston for my 25th highschool reunion. I've come to realize through FaceBook that I knew far fewer people than I thought I did back then, far fewer, but I do know some buddies from the basketball team will be there so at least I won't be sitting by myself at a table for two hours listening to my iPod.
