I’ve seen a lot of commentaries lately describe conditions as if things are calmed down. There was a bit of growth scare, a little T-bill indigestion earlier in the year. The Chinese are somehow both stimulating their export sector by devaluing CNY, and also controlling the price of gold while they do it. The contradictory inflation/deflation signals have apparently just canceled each other out!

There are, in reality, cycles within cycles. In March 2015, for example, the “rising dollar” paused after its first phase devastated some currencies and commodities (primarily oil, that anyone cared to notice). The economic damage hadn’t yet become visible, so the “supply glut” talk seemed reinforced by a lack of things happening right then. Until that August and CNY, kicking off the second half, or cycle within a cycle, it may have seemed like a lot of smoke with no fire.

It was the same way in 2008, too. The panic period can be broken down into two parts, the first finishing up with Bear Stearns’ near demise. In between March 2008 and July 15, optimism bloomed in official and unofficial ways. Policymakers were careful but still spoke especially in private as if their skillful handling of things had warded off the worst cases. Maybe even the US would avoid a recession altogether.

At neither time did anyone actually tackle the issue head-on. It was, and remains, the very same one which Ben Bernanke ironically spoke about at length in his famous “deflation” speech.

Back in November 2002 during the worst of the dot-com bust, then only as a Federal Reserve Board Governor, Ben Bernanke was catapulted into the mainstream briefly eclipsing even the “maestro” himself. The central bank, the future Chairman said, had this thing called the printing press and if ever pushed into a dire position could effectively use it.

Thus, the mere threat of using it was pretty much all that would be necessary to stave off any deflationary wave before it started; let alone one that might last for any length of time.