All about inflation

The news these days seems to be all about inflation (a general increase in the price level) or its dreaded twin, deflation (ditto, but with decreasing prices):

• Social Security benefits, which are adjusted to inflation through a COLA (cost of living adjustment), are not projected to go up in 2010 or 2011 because it's projected that there will be no inflation to adjust to. As a policy matter this seems fine---no inflation, no COLA---but it does add to the flames about deflation...
• ...Flames which are fanned by Nobel-winner Paul Krugman, who says that wages are falling and deflation is a threat, hence the need for more more more: "more stimulus, more decisive action on the banks, more job creation".
• On the other hand, Carnegie Mellon economist Allan Meltzer says that inflation is coming: "no country facing enormous budget deficits, rapid growth in the money supply and the prospect of a sustained currency devaluation as we are has ever experienced deflation. These factors are harbingers of inflation."
• And, speaking of inflation, stamp prices are going up May 11, from 42 to 44 cents for a basic letter. The good news is that you still have a week to buy Forever Stamps for 42 cents!