Editor's note: Following is the second installment in a three-part interview. Here is Part 1, and here is Part 3 .

NEW YORK ( TheStreet) -- Economic and market bears don't get more notable than David Rosenberg, the chief economist and strategist at Canadian investment firm Gluskin Sheff.

Rosenberg generated headlines this August when he advised clients that the "current economic malaise" is a "depression," and not "some garden-variety recession."

The former Merrill Lynch chief economist also was ahead of the pack when he raised alarms about the housing bubble in 2005 and warned of a coming recession in 2007.

In the following installment of my interview with him, he discusses why inflation is still years away, what the government should do to get the economy rolling again and whom the president should pick as jobs czar.

Eric Jackson: When do we see real inflation in North America?

Rosenberg: A decade from now for sustained inflation. We know right now that corn, energy and cotton are experiencing price inflation, but I don't think it will be sustained. We're still in a deflationary environment. There's still far too much excess capacity in the U.S. -- for plant, commercial real estate or labor for that matter.

I think we're in year two of a six- to seven-year transition to the next bull market in the U.S. So it's going to take some time to create some meaningful inflation pressure.

Where are we in the debt deleveraging cycle?

There are two ways to delever: Pay down your debt, or stiff your lender. The fact that so many people have stiffed their lenders doesn't change the fact that we're still in this deflationary world where we're extinguishing excess debt. We've probably delevered 1 trillion dollars in household debt to assets, but we've got another 5 to 6 trillion dollars to go.

So, in terms of where are we with the whole deleveraging process, we're not at the national anthem, but, at best, we're just past the 3rd inning. We've still got a ways to go, and it's tough.

People say to me, "Where are the soup lines and bread lines if things are so bad?" I tell them, "They're in the mail, in the form of 99-week unemployment insurance checks." The U.S. government has managed to turn unemployment insurance into a quasi-welfare scheme.

When you take a look at organic real personal income, which is personal income in constant dollar terms excluding government transfers, it's still down almost 6% from where it was in 2007, so you tell me what kind of recovery we're in? That creates such a big problem. Consumers have upped their savings rate, but it's not enough to compensate.

The government is still doing everything it can with steroids to get things going again and we're still debating whether we're in a double dip or not

So what should the government be doing?

Lots. There could be a shift in tax policy, a shift in regulatory reforms, a shift in energy policy to promote self-sufficiency, an infrastructure package that would have a real bite for employment.

I don't classify myself as a Keynesian or an Austrian. I'm a realist. The problem with the Keynesian policies that have been implemented is that they've had no multiplier effect.

I mean, who isn't a Keynesian? Who doesn't want to get the economy started again? But the policies that got enacted had no impact on restarting the engine. The type of fiscal policy we've had has been too short-term to handle the long-term structural problems we face.

So you wouldn't be against a large infrastructure-focused stimulus plan?

No, but tie it to energy self-sufficiency and tie it to employment. I mean, look at the 99 weeks of unemployment insurance. People are getting paid to sit idle. What are we doing about retraining and providing them with skills? I would say, "You want your unemployment check? Pick up a shovel from 8 a.m. until noon, and from 1 to 5 p.m., we're going to put you in a classroom."

The government has been so distracted in the last couple of years by different policies and agendas. I think what has to happen is they have to declare a war on unemployment. It has to be done right. It has to be done with limited impact on the public purse. If you just focused on jobs, it's amazing how many other problems would take care of themselves, from housing to redressing debt-heavy balance sheets to paying for your health care.

The right policy would be to nurture the environment for the private sector to create jobs on a sustained basis. And the existing policies aren't doing that.

Maybe it's a laudable social goal to insure 35 to 40 million Americans with health care. But when you do that, you end up freezing the small business sector which provides two-thirds of the job pie. It's not very helpful.

There's a crisis in state and local governments right now. They are 13% of GDP. Outside of consumers, they are the biggest spender in the economy -- double the size of business spending. They are cutting back on services and employment at an unprecedented rate. We need to stop that.

Let's clear the air on health care reform, on tax reform.

Would such changes make you bullish again?

These kinds of positive policy shifts, plus evidence that we're further along in the debt deleveraging cycle, would make me turn bullish. Nothing would make me happier. Make no mistake. It's been 10 years. I can't wait to be bullish again.

Who would be your pick for job czar, if President Obama took your advice and created such a post?

Mortimer Zuckerman. He'd be a phenomenal choice. It has to be someone with real-world experience, not another academic in there.

If you were Bernanke, what would you do in the next year?

Stay the course

What are acceptable capital requirements for banks?

Basel III is not far off the mark. My big problem with it is eight years for implementation. There will be a couple of recessions between now and then.

What about the recent rise in commodities? Are higher prices here to stay because of a secular shift in constrained supply and increased demand from emerging markets? Can this offset the deflationary forces you discussed before?

The last time I heard that argument was on the way to $150 oil. We're probably replaying that cycle to a lesser extent now.

There is a supply problem at the moment in cattle and hogs, cotton, and corn. I don't think this leads to sustained inflation but, for the time being, we have supply shortages and weakness in the past six weeks of the U.S. dollar. But to me, there's more that goes into inflation than just commodities. I think the price of labor is still pretty important. That's still going down.

Commodity prices will ebb and flow. I do believe that they're at a higher level now because there has been a structural shift on the demand side because of China and emerging Asia. But the bottom line is that they won't be enough to offset labor cost deflation.

--Written by Eric Jackson.

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Eric Jackson is founder and Managing Member of Ironfire Capital and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund, Ltd. In January 2007, Jackson started the world's first Internet-based campaign to increase shareholder value at Yahoo!, leading to a change in CEOs in 2007. He also spoke out in favor of Yahoo!'s accepting Microsoft's buyout offer in 2008. Global Proxy Watch named Jackson as one of its 10 "Stars" who positively influenced international corporate governance and shareowner value in 2007.

Prior to founding Ironfire Capital, Jackson was President and CEO of Jackson Leadership Systems, Inc., a leadership, strategy, and governance consulting firm. He completed his Ph.D. in the Management Department at the Columbia University Graduate School of Business in New York, with a specialization in Strategic Management and Corporate Governance, and holds a B.A. from McGill University.

He was previously Vice President of Strategy and Business Development at VoiceGenie Technologies, a software firm now owned by Alcatel-Lucent. In 2004, Jackson founded the Young Patrons' Circle at the Royal Ontario Museum in Toronto, which is now the second-largest social and philanthropic group of its kind in North America, raising $500,000 annually for the museum. You can follow Jackson on Twitter at www.twitter.com/ericjackson or @ericjackson.

You can contact Eric by emailing him at eric.jackson@thestreet.com.

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