I have also wrestled with the inflation/deflation scenarios and keep coming back to the same point on which I am stuck - If $1 Trillion is mortgages reset and seize in the next year or so and the CDOs and MBSs based on them crater in an amount of $500-750 Billion - How could the Fed or gov every inject enough liquidity to compensate for that deflation? How would they get the $1.5 Trillion or so into the system?
Either Inflation or Deflation we are screwed and not in a nice way.
Regards,
Lurking’
"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."
~~Ludwig von Mises