I am admittedly of very little brain. But I have read a lot of good arguments regarding inflation and deflation over the past few years.
One of the most insightful posts I read on this matter regarded the relatively recent collapse of the Argentinean currency:
They had severe credit contractions that were very deflationary. However, while they had deflation in their own economy they unfortunately did not exist in a vacuum. The value of their currency decreased in the world markets (as creditors feared they would not be able to repay their loans) even while the amount money in their banking system also decreased. The costs of goods in Argentina increased (which is generally viewed as inflationary) even amid their credit destruction (which is generally viewed as deflationary). And the currency continued to be devalued on the world markets until the eventual collapse of their government and currency.
It took a long time for me to wrap my little brain pea brain around this but: Monetary deflation certainly does not necessarily mean that our dollar will be able to buy more in a global environment. It seems counter intuitive, but monetary deflation may also decrease the relative trading power of our currency.
