According to Bloomberg, the U.S. stands prepared to flood the world with dollars.  Much of our current problem has been caused by the fact that the U.S. has already flooded the world with dollars. 

There is a dangerous misconception that deflation is a decline in wages and prices.  Deflation is, in fact, a decrease in the money supply.  While we have witnessed a deleveraging of the derivative market, which explains the drop in asset prices, the monetary base has exploded.

Much of the current strength of the dollar can be attributed to psychology—folks are scared and are running to perceived security—as well as short term technical factors.  The demand for dollars is high which is keeping the velocity of money low.  Since more dollars are being held, there are less dollars competing for products.  Hence, the price of products is staying low.  However, as more and more dollars enter the system, there will be less incentive to hold them in savings.  An increase in the number of dollars will result in a bidding up of prices as more dollars compete for the same amount of products.

We are in the first stage of a possible hyper inflationary environment.  The inflation is entering the system, but because of the high demand for dollars, people don't realize it because prices have not started to rise yet.  In stage two, as more dollars compete for products, prices begin to gradually rise.  However, people still try to hold their dollars thinking that the price rise is temporary and that they will soon drop.  In stage three—the actual hyperinflation—prices are rising so quickly that people spend money as soon as they receive it, causing a negative feedback loop that results in a fiat currency dropping to its intrinsic value, zero.

Although it is impossible to predict the future and to know how it will all play out, keep your eyes on the horizon.  There is an inflationary hurricane brewing.