Here is some more expert support for US Person's view that deflation is the paramount scenario of the debt crisis:
The twenty-fiver years of empirical research Dr. Keen refers to includes the work of Nobel economists Kydland and Prescott who found that private debt is created before infusions of government money because banks do not loan out money from their reserves as thought in classical theory. A bank creates it own "new money" by simply crediting the customer's transaction (checking) account for the amount of the loan made to the customer. If this is in realty the case, then the fact has profound implications for allowing money creation to be primarily in the hands of private institutions not beholding to the body politic. Someone should tell Ben Bernanke about Section One, Article Eight.