The evidence supports Wang's interpretation. Wang's inflation analysis, by category: commodity prices (flat or declining), stock prices (flat or modest increase), asset prices (housing, commercial real estate, business assets declining), median incomes/wages (flat or declining), and business pricing power (none or very little). Wang's conclusion: a bias toward disinflation (lower inflation) or deflation (actual price declines).

Further, Wang said investors should look at the monetary and fiscal stimulus efforts -- and in particular the Fed's effort -- "as trying to get out in front of the deflationary problem before it takes hold, rather than as increasing inflation."

In addition, Wang said the inflation hawks should consider this point: even when the U.S. recovery starts, GDP growth will probably trend toward 2%, or perhaps 3%, if we're lucky, "hardly the conditions for rampant inflation." Core U.S. inflation is running at a 2.0 to 2.2% annual rate, overall inflation at about a 2.3 to 2.7% annual rate, he said. Both are likely to fall as the recession continues in 2009.

Economic Analysis: To paraphrase a famous saying: a little inflation would be a good thing -- it suggests economic growth is taking place. The U.S. must do what it takes to avoid the dreaded deflationary spiral (declining revenue, layoffs, declining demand, more declining revenue, more layoffs etc.); that scenario would take money out of commerce, further delaying the economic recovery. The Fed and congressional actions are designed to stimulate commerce and avoid the above.