I'm just a wandering on the face of this earth
Meeting so many people
Who are trying to be free
- Moody Blues

Although most folks define inflation in terms of rising prices, the classic definition of inflation is expansion in the quantity of money and credit.

To realize inflation, economies need a mechanism for creating more money and credit supply. In modern economies, that mechanism is primarily the central bank. Central banks, such as our Federal Reserve, are empowered to create money and credit by fiat. Due to political influence, this empowerment is certain to lead to propensity for generating excessive supply over time.

While money-printing machines are necessary, supply alone isn't sufficient to create inflation.

Demand is also required. People must be willing to take risk. Because modern monetary systems are structured around the pyramiding effect of credit, economic actors need to be willing to borrow in order for monetary quantities to appreciably expand. If folks aren't willing to take on additional debt, then significant inflation can't occur.

So what's happening currently? The money printers are certainly doing their part, as bureaucrats around the world are creating trillions of dollars in potential supply.

But borrowers aren't jumping on board with the same reckless abandon. Instead, they're showing a proclivity for saving and paying down existing debt. Money velocity is slowing dramatically.

Should this risk-averse behavior relate to a secular change in social mood, then one has to wonder whether bureaucrats aren't essentially pushing on a string in attempts to inflate the monetary system.

If this turns out to be true, then do bureaucrats basically pack it in and accept a secular deflationary context? Or do they pursue innovative ways to circumvent the broken credit machine?