"Given the option of massive unemployment with possible deflation and merely high unemployment with inflation, Nixon and the Fed chose that latter as the lesser of two evils"

No, it's all about arrogance, ignorance & and the dim-witted. Commercial banks create new money when they make loans. They do not loan out savings. Savings impounded within the commercial bankings system have a payments velocity of zero. The stoppage of the flow of savings shrinks aggregate demand, and therefore produces adverse effects on GDP, the level of employment, and on other indicators of the state of our economic health. This is the origin of stagflation.