Deflation Against Inflation Making The Hard Choices
The current recession has opened many sleeping eyes and has compelled many people to look back into the past for comparison and lessons from the great depression. We are yet to accept the fact that the current situation asks for more than just jobs and tightening our budgets. The world is now viewing its worst deflation ever.
There is a lot of talk about why the US government chose deflation over inflation to deal with the current financial situation. But first we have to understand what these terms are really about.
Inflation and Deflation
Inflation is an increase in the supply of money and credit, while deflation is a decrease in the supply of money and credit. Another way to put it is that inflation or deflation is the increase or decrease in availability of money and credit above or below that of a stable population size of peak wage earners. That is, if there is an increase in the population the availability of money would reduce and it would get distributed among more people on the principle of average.
Cash and Credit
Another thing which needs to be explained is the difference between cash and credit. These two terms are simply what we have earned through our business or as a salary from our jobs and what we have from our banks which we did not earn but have to pay back to a lending company (mostly a bank) with an interest. Credit is good as long as it has growth and gives you expansion in your business. That is if you take credit from a bank to expand your productivity then paying interest is not that bad. But if the credit is taken to improve your living standards then this is a non productive spending and will eventually require to be paid out of your income which has not increased due to this credit. The only thing that this credit gave you was temporary increase in your spending capacity. This in the longer run will affect your spending from out of your income as a portion of it will have to be diverted towards its debt servicing,. 
The present scenario is exactly the same as mentioned above. The income is the same but the spending population has increased, hereby distributing the available money into more hands. The credit has already been exhausted by the government and what are left behind are the debt payments. If more credit is created then the there will be more debts to payback and the value of currency will fall against the gold standards which means that debt will automatic increase.
The Argument
The choices for the government were to choose between inflation (create inflation by flooding the market with more credit and default debt servicing) and deflation (deflate economy and clear the debt) in both the cases the government and the US population has to see drastic economic scenario but the one with lesser long term effects was deflation which would result in a stronger currency eventually but after the blast effect of this explosion is over.