How deflation is the real enemy in this recession, as it was in the Great Depression

Forbes - What Would Keynes Do?

An engaging and mildly technical article drawing the parallels between the Great Depression and the current economic downturn, highlighting lack of government welfarist policies (FDIC, unemployment insurance), deflation, and stringent Federal Reserve policy as the three major factors that operated in the Great Depression. The differences between then and the current recession is that we have some government welfarist programs and the Fed seems much more pro-active and liberal with spending. But deflation is still a major risk, and the article illustrates how that is so: loans become harder to pay back, coupled with the fact that hoarding money automatically increases potential buying power. What is needed is an increase in 'velocity', or spending the dollars that we have available; the conclusion is the economy needs is government spending on goods and services. It doesn't need to buy up bad debt (this didn't work before, and it won't work now because it's merely an exchange of similar assets without adding liquidity).