How worried should we be about deflation?

With the collapse of the housing bubble and subsequent plunge in stock prices throwing the economy into its worst recession in 70 years, there has been considerable concern raised about the menace of deflation. This concern is misplaced. While deflation can be harmful, it is far more a symptom of economic weakness than a cause. If the American government launches an effective stimulus package, and the governments in other major economies do the same, then there need be little fear about defla