Mrwrong, you are partially correct. We have a fiat money system. We also have the beginnings of the same problem that we had in the great depression. The FED turned the liquidity spigot wide open, but the banks still wouldn’t lend, hence symptoms like the TED spread widening. Deflation only requires a lack of confidence on the part of banks to lend, or consumers to borrow. Either one will do the trick.
