Deflation, in my humble opinion, can be defined in one of two ways - either as a decrease in the price paid for goods and services or a decrease in the money supply. At this point in time, I believe that we are, without a doubt, seeing both.
There can be very little debate about the decline of asset, service and goods pricing. Charts of any asset class, with the exception of US Treasury bonds, all look like they have walked off of a cliff. The price of consumer goods is falling rapidly across the price spectrum as retailers from Wal-Mart (WMT) to Barney's of New York offer increasing levels of discount pricing. Durable goods prices are falling as both new and used automobiles, airplanes and other goods are no longer in sufficient demand due to economic and credit market conditions. The Baltic Dry Index has taken an unprecedented tumble.
When analyzing money supply, the picture becomes a bit more murky. While unprecedented amounts of liquidity have been injected into world financial markets by the Federal Reserve, European Central Bank, the Bank of England and other central banks, the flow of credit to corporate, institutional and private clients has decreased significantly. While I am not an expert in money supply statistics, I do firmly believe that a reduction in credit availability in a credit driven global economy should firmly constitute a reduction in money supply and therefore meet the definition of deflation.