Should We Worry About Deflation?

Yes, the current economics brain trust is worried that consumers will collectively show the good sense to delay purchases, pay down debt, and increase their savings. After all, this liquidation of malinvestments will likely take a while. The prudent thing to do in times of uncertainty is not to ramp up debt and spend money you don't have.

But now, all of a sudden, "saving" is a dirty word.

The government wants us to spend to get the economy humming again. The Fed has lowered the interest rates so you'll increase your spending (and increase your debt). The bailout is supposedly going to encourage banks to provide easier credit so you will borrow (and increase your debt). They are providing a good example by spending money they don't have on the bailout handouts (and increasing their debt and yours).