Well you really couldn't have both. If inflation ran, the Fed would be validated. They aren't going to be. If that was the case though, they have the tool for that: simply raise interest rates.
Their problem is the deflationary supercycle we are in and the fact they cannot get out of it. Japan already is mired deep in it, China is about to enter it, and we are going deeper ourselves.
The debt problem is going to be resolved through default. They will monkey around with it but in the end, a lot of the paper out there will go bad.
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I do believe we will probably default in the future the moment our debt to GDP ratio went over 100%. Which means trying to pay off the debt is almost unrealistic unless the government takes it seriously (doubt it will happen). The current situation where people have no choice but to depend on the government only makes it worst. I can only hope our taxes will stay at a manageable level, but there are definite issues that people do not understand. If our debt serves a purpose (expand), then it is good debt otherwise its only going to hurt us.
We are in deflation mainly due to tech because more is being produced with less effort (even if it includes cheaper labor at other countries sometimes).
Automation and wage deflation are what is eating up any chance of inflation going forward. This is something that has been taking place for 20 years and is only accelerating.
The US being over 100% is still a drop in the bucket. Look at Japan and China.
I look for sovereign debt to implode, starting in Europe and the Middle East. Those are the two most vulnerable if you ask me. The EU has more problems than most imagine.
It is a ticking time bomb ready to go off.
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