Charles Longfellow

Some Random Thoughts on Deflation

The money supply has been blamed as a factor in deflation as that money supply is reduced. However, other definitions of “deflation”, (wikipedia), refer to dual contributing factors: decrease in money supply, and decrease of credit. To what extent is decrease in availability of credit a contributing factor to deflation? If credit is considered beyond common types to include leveraged amounts, as per derivatives and other instruments for leverage, (often leveraging many times over by exotic investment vehicles), could this provide an answer as to why printing dollars has so far not stemmed deflation, and theoretically may not create inflation until the leveraged credit that is no longer available is offset by new dollars?