The dollar is falling and we have no inflation. This has never happened before in the U.S., never..... did you know this?
The dollar is falling relative to all major currencies, by a lot. It is falling relative to gold too.
We have no inflation. There will be no automatic Social Security raise next year because there has been no inflation.
How can this happen? In economic theory, when a country generates a significant fiscal deficit its currency falls relative to the world because other countries discount the value of its currency, justifiably because the deficit is inherently a case of a government printing money.
Simultaneously, the country experiences inflation because everything that is bought with dollars (all imports) become more expensive (in dollar terms).
This isn't happening now. We are printing money but not facing inflation We aren't following the economists' script. Why?
Three reasons: (1) Some major product categories from foreign suppliers are cutting prices to maintain market share, such as automobiles and oil producers. (2) We just came through a financial crisis that saw a collapse of housing prices... that produced a deflation in a major product category. (3) China, a major source of our household goods is keeping the Chinese currency from falling relative to the dollar.
I don't think the current conditions will continue.