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Saner heads are definitely not prevailing in the increasingly dark and damp discussion of one of the hottest economic topics of the day - deflation.

In fact, a sort of dementia now seems to be manifesting itself in some of those individuals who utter the word "deflation" - a condition where the utterers undergo changes in their brain function, sometimes becoming disoriented about time and people, oftentimes believing they have been transported back to an era of sound money when deflation really mattered.

Nowhere was this dementia more noticeable than with Senator Dick Chuck Schumer (D-New York) when he appeared on ABC's This Week on Sunday.

The following comments were made when discussing the danger of providing too small of an economic stimulus package with deflation already at our doorstep:

I believe we need a pretty big package here. First I think that Congress will work with the President-Elect starting now and we'll have a major stimulus package on his desk by inauguration day. I think it has to be deep. In my view it has to be between $500 and $700-billion dollars and that's because our economy's in serious, serious trouble. You look at unemployment, you look at consumer confidence, you look at the stock market.

We're on the edge of deflation. Once you get into deflation you almost never get out of it. That's what the Great Depression taught us, that's what Japan taught us.

So a strong shot in the arm, just the way Barrack Obama has conceived it - infrastructure, green jobs is what is needed and most economists say, to make this work, you need about five percent of GDP which would be $700 billion. It's a little like having a new New Deal, but you do it before the Depression, not after.

The dementia was plain to see as Schumer delivered these lines, moving one flat, extended hand horizontally in front of the camera to depict being on the "edge" of deflation, then making sharp downward movements with that hand to demonstrate "getting into" deflation.

The screenshots below from the video at ABC demonstrate this sequence.

First, on the "edge" of deflation...
And then falling "into deflation", a development that would apparently be so painful that the Senator had to close his eyes and grimace just to get through it.
He may have mumbled something about Irving Fisher as well, but it was too faint to be accurately transcribed.

The dementia has apparently spread to the U.K. as well, this item from the Times Online showing how a seller of "with-profit" bonds has somehow been transformed into some sort of a cartoon character as a result of deflation.

Someone should probably crank up the microfiche machine to see if there were any similar occurrences of deflation dementia back in the 1930s.

Source: Deflation Dementia