Jeff Nielson argues here that the desperate efforts of governments everywhere, but especially in the US, to disallow a deflationary collapse are motivated by fear of actual insolvency, not mere deflation:
A solvency crisis is an economic nightmare several orders of magnitude worse than a mere deflation. In a solvency crisis, "deflation" implies nothing less than bankruptcy. This is why our intellectually bankrupt central bankers have refused to allow deflation to take hold in our economies. Our economies are saturated with bad debt, and when this bad debt is eventually purged from our economies, our economies will default on their debts. Period. ...
In an ordinary deflation, "cash is king" (even arguably worthless paper currencies). However, in a solvency crisis "cash is trash" unless that cash is directly backed with precious metals.
