My take on the inflation/deflation debate

This is what an apogee looks like

Vox Day and Nate are having a fascinating knock-down drag-out debate on inflation.  Now, as is often the case in such debates, what is precisely the question up for debate* gets lost in arguments over definitions.**  In this case, the sidetracking question is, "What is money?" which has itself been diverted into a discussion of whether our money is primarily credit money or whether it is fiat money with the characteristics of credit money. Pages and pages ensue.

I put it to you that the real definition is not that complicated.  Money is what is used as money, when it is used as money.  Are gold and silver money? Sometimes, and at other times they are just rappers' teeth.  Is credit money?  When it can be used or has been used*** to buy something.  Is a dollar bill money?  Not if I fold it into a bowtie.  But it can be used as money, just like gold and silver, and just like credit. Yes, there are different kinds of money, some "better" and some "worse," just like there are different kinds of taxes that have different impacts on those who pay them. Yet they are all taxes.

Now that we have decided that money is whatever is used as money, we have to count how much of it we have, because in order to determine whether our future holds inflation or deflation****, we have to know if we will have more or fewer things used as money. Nate is probably correct that the actual number is unknown and perhaps unknowable, but can be estimated. Whatever the number, Vox is correct that credit as money dwarfs all other types of as-money, which means that the amount of outstanding credit will likely determine whether we have more or less as-money going forward.

So it comes down to this: if the amount of credit used as money has reached its apogee and is contracting or will contract, we will have deflation, no matter what the Fed does and no matter what anyone else does. Unless what they do is create another type of money that can replace credit and overcome the deflation in credit, in which case we will perish on inflation.

I suspect the real answer is that we will have a mighty fight between inflation and deflation that will last for many years, but that deflation will eventually strangle us, then inflation will burn the corpse to hide the crime. That crime being that we were stupid enough to build a financial system using promises as money.

* Which I appear to have missed anyway. I suspect it is something like "Will we perish by inflation or by deflation?"
** if for no other reason than the definitions determine the outcome of the question.
*** The distinction being that a Chase credit line for $100 quadrillion would not increase the money supply immediately by that much - you still have to buy something with it.
**** Which we'll define as an increase or decrease in the supply of money.