I'm not sure what Krugman was referring to, but I'm guessing he was making the case that because people tend to not spend money as freely in a depressed economy, that the risk of inflation or hyperinflation is mitigated to an extent. Effects of inflation become exacerbated when there is an acceleration in spending, whether it be on goods or currency or commodities, because nobody wants to hold the currency. For the past few years, this hasn't been a problem because people are scared and seeking safe havens, which is how most people view the dollar. This doesn't change the underlying fundamentals.

Here's the thing- there is a fundamental law in economics called supply and demand. Nobody, not the US, nor Japan is immune to it. If you increase the supply of something, and there is not a corresponding increase in demand, that thing becomes less valuable. In the US there has been an enormous increase in the money supply with no corresponding increase in real output. That makes the money circulating in the economy less valuable. Whether the costs of goods go up today, tomorrow, next week, or three years from now is somewhat immaterial. All of the evidence is in place that at some point the costs of goods will almost certainly go up, unless there is a shift in demand or a decrease in the money supply.

EDIT: Now we see that Apple is going to be dumping $45 billion into the economy. Not a good signal of strength for the dollar.

Thanks for the enlightenment. Reading between the lines, the case of Japan's missing inflation might be a variant of "in the long run, we're all dead," given the decades of stimulus and low inflation. It'll be interesting to see how it plays out here.

Apple didn't exactly stuff that $45 billion into mattresses or anything, it was already "in the economy". Large corporations keep cash invested in securities.

Yeah I'm aware. My point is that they obviously aren't too bullish on cash if they are offloading $45 billion of it.