Money supply doesn't grow if money isn't lent (or spent). Thats what fractional reserve money growth is - successive loans and deposits that expand money supply exponentially. FED debt purchase and print is only one half of the equation. The other half, is active commercial lending.
If you read through the wiki article on deflation, we have a real problem going into this new year. Imo, I'm sure the average person hasn't many avenues to react except to hunker down themselves and save whatever cash they can. This situation is going to get messy if the the only solution the state and local gov't have is to raise taxes, the future sure looks gloomy. If the consensus is to mock our fiscally irresponsible neighbor just as Congress did to the auto makers, we are all going down with them for a bowl of stone soup.
>I see a deflation bubble happening. I only wonder when it will pop. I think what you are probably getting at is that many are so pessimistic and able to bet pessimistic that like an upward bubble we are in a downward bubble. Completely agree there. Though one very good book I found is Soros latest book. Yes he is gloating in spots, but he is right. Essentially what he calls this is reflexitivity. Where what you think is happening is not really happening, but because you think it is happening it will happen. A sort of self-fulfilling circle. Though we shall see how this year 2009 will turn out. I am optimistic though...