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The Inflation / Deflation Forces Battles On

As the author indicates there are both inflationary and deflationary forces at work but takes no position on the ultimate resolution or outcome. So while somewhat informative, what do we make of this article? While many economists concerned with the consequences of fiscal and monetary policies that amount to "borrowing our way out of debt", see deflation for up to two more years then massive if not hyper-inflation, the more likely prospect is another asset bubble in a jobless recovery. The policy choices that fit government objectives are gradual depreciation of our currency while keeping long term interest rates down to avoid more unemployment. The argument that interest rates will rise as the Chinese e al stop buying our bonds is not realistic....oh, they may decrease purchases but the Federal Reserve has both an infinite balance sheet and the Congressional mandate to work toward full employment and stable prices (despite the inherent contradiction).
So, with a declining dollar putting pressure on prices to rise and interest rates held steady why would inflation not explode? Because, prices are the result of the demand supply equation not just the cost to import/produce goods. In a jobless recovery, household income won't increase and housing prices will decline in real terms...the money won't be there to pay higher prices. Demand for foreign goods will fall to offset the exchange rate changes. Until we get a government that wakes up to loss of our manufacturing base to China (83% of our non oil trade deficit is with China) and stops talking up free trade instead of fair trade, inflation or deflation will be the least of our problems.