Deflation -- On its way?

To be honest with you, I think we'll be seeing it by the end of 2009, but for the health of the wider economy, it is to be hoped I am wrong. The New York Times fretted about it on Nov 1st, though, and it seems to be discussed more and more by one respected party or another. Even Paul Krugman says we should not worry too much about inflation or "prudence" right now, which I think is a sneaky way of saying that deflation is the bigger worry. With consumer credit starting to get really crunched, it's hard to see where a growth in revenues will come from. Basically, I think the risks of this Recession becoming a Depression are growing by the day. And the news just keeps getting worse and worse . . .

Of course, fight coming deflation too hard and you could spark over-massive inflation . . . So, you know . . . Everybody wants to hedge against all possibilities, right?

In the (very) long run, I think stamping down the U.S. credit-binge will be a good thing, as it's gone totally out of control. But will stamping down the credit-binge cause a Recession or a Depression? I only wish I could actually know . . . Crazy as it may sound, my money is currently on Depression . . . :-p