I guess I had to go through the process of creating this question before I could see that this is exactly what Tom is saying in the lecture: that if it weren’t for inflation of the money supply by the Fed, prices would have gone down. But the decrease in prices that would have been anticipated from the increases in productivity was offset when the Fed inflated the money supply, thus resulting in prices remaining the same.
To quote Gilda Radner “NEVER MIND!”
