If the dollar bear has resumed, the global inflation/Monetary Disorder issue could quickly reemerge. Federal Reserve efforts to reliquefy our system would be expected to prove self-defeating in a backdrop of significant dollar and Treasury market weakness. Such a scenario would expose what I believe is a major flaw in the conventional economic view that there is a trade-off available between the difficulties inherent to a long economic workout and the acceptance of a higher level of inflation. I fear the current policy path ensures an especially arduous and protracted adjustment period – along with myriad problems associated with an unwieldy inflation backdrop.

I also want to take exception with Professor Mankiw’s likening of a Fed push toward higher inflation to the decision to abandon the Gold standard in 1933. This gets back to the disagreement I’ve had with the "inflationists" for years now: In the name of Keynesian economics, inflation proponents have repeatedly called for massive stimulus in response to the bursting of THE Bubble, while in reality this activist policymaking was instrumental in only extending and worsening a systemic Credit Bubble. This was especially the case after the bursting of the technology Bubble and is again true today following the bursting of the Wall Street finance/mortgage finance Bubble. Now, more than ever before, "Keynesian" inflationism is THE Bubble. When it eventually bursts Washington policymakers will have little left to offer.