A credit induced boom time always needs a deflationary bust to bring things back in balance. So yes, we will have deflation when the credit boom can no longer be sustained through additional credit expansion. Previously consumers were expanding credit. Now the Fed is via its balance sheet. This credit expansion cycle will end at some point.

But we can have rising prices during a deflation. It is more unusual than falling prices during deflation but it can happen. History has numerous examples.

If the currency is tied to nothing (value is dictated by government mandate or fiat) there is also a deflationary scenario in which prices are falling measured against a stable value currency but because the national currency is being debased and is loosing purchasing power faster than prices are falling because of lack of demand, prices measured in the national currency actually go up measured in that currency.

That may not happen with the US dollar, but that is the current path we are on if we do not change course.

So I do believe we will have deflation. I just do not believe it will automatically mean we have lower prices (with the measurement of prices in US dollars). We may or we may not, depending on both the economy and the value of the dollar.

John