Trump up that deflation fear - it doesn't exist... $40 crude, $800 gold...and you call that deflation? Is that all you got? The deleveraging is almost over...we may have another leg down in the crowded, gamed sectors (energies, metals)...but watch consumer prices not come down at all.. ONLY some USD based assets will flounder and fail - Equities, bonds, real estate....granted that is a large amount - but watch consumer prices go nowhere but up... You think your food will be any cheaper? You think your gas for your shitty car will be cheaper? You think it will cost less to heat your home? Put clothes on your back? Put your kids through school? Insure your family? The deflation monster scared the public in 2002 - it never materialized BECAUSE THERE WAS NO CHANCE OF DEFLATION. Same as now...
I'm inclined to agree. It's pretty difficult to have deflation - regardless of the temporary destruction of liquidity - in light of massive spending/stimulis/printing of money.
Remember, the money is not "printed" until a loan is consumated. People tend to "gloss" over this fact.
If they give the money to the Wall St/Detroit, then it's in the system... The money that has been printed will make its way into global supply - it's just a matter of when..
Again, the key word that even you yourself used is . . . IF . . . You also fail to mention that the Fed can "sterilize" these injections of money into the system. Even Bernanke has stated this in testimony before Congress a couple of months ago. I'm not trying to play devil's advocate here, but yields on TBills are near ZERO for a reason, AND the consumer is pretty tapped-out as he watches his neighbor file for unemployment insurance. Not the kind of environment that would push prices higher, in my opinion.
Given that most consumers own equities, bonds, IRA and 401 investment accounts, real estate, etc. and already maintain considerable debt levels with unemployment surging . . . where is the DEMAND going to come from that you see pushing inflation up?