The idea that QE wasn't inflationary is a fallacy. It massively inflated financial assets and housing, not consumer goods. This widened wealth inequality and fueled intergenerational tensions, which became a primary driver for the rise of populism—an unintended consequence that central banks eventually acknowledged.

Bear markets are not all the same. Deflationary shocks (like 2008) cause rapid collapses as earnings evaporate. Inflationary periods (like 1966-1982) cause a slow, grinding decline in real returns as valuations compress, even while nominal earnings may grow.

The two-decade deflation after 1873 crushed debtors like farmers, creating a potent populist backlash. This economic pain, where debts grew in real terms while incomes fell, proved a more powerful driver for conspiracy theories than inflation. It led to blaming British bankers in the US and the rise of economic anti-Semitism in Europe.

If cash-strapped consumers stop spending, retailers will slash prices to survive, causing deflation. Policymakers may misinterpret this as a sign that their rate hikes worked. In reality, it would be a symptom of economic decay, not successful policy, leading them to continue a harmful course of action.

Sustained inflation requires nominal income growth that allows consumers to absorb price increases. When jobs and wage growth stagnate while energy prices rise, the economy doesn't spiral into 1970s-style wage-price inflation. Instead, without real wage gains, consumers are forced to cut spending, triggering demand destruction. Policymakers fear a wage-price spiral, but markets see flattened real wages leading straight into demand contraction.

Not all deflation is harmful. While innovation-driven price drops are positive, the current deflation is crisis-led, caused by widespread demand destruction as consumers run out of money. This signals a dangerously contracting economy, not progress or corporate generosity.

Economic uncertainty and anxiety are the root causes of political violence. When governments devalue currency through inflation and amass huge debts, they create the stressful conditions that history shows consistently lead to civil unrest.

Since WWII, governments have consistently chosen to print money to bail out over-leveraged actors rather than raise taxes or allow failure. This long-term policy has systematically devalued currency and concentrated wealth, creating today's deep economic divide.

Jim Grant argues the Fed, haunted by the Great Depression, wrongly treats all deflation as catastrophic. He differentiates between harmful credit-driven collapses and beneficial, technology-driven price declines, which he calls "progress," suggesting this leads to flawed policy.