Concerned about inflation? Don't be

Further, with demand falling, companies may cut prices to compete, or to get rid of inventory. That fact, combined with lower corporate costs ushered in by globalization (among other factors), may lead to a deflationary price and-wage spiral that would prompt companies to contract their operations even more, by laying-off more employees, increasing unemployment further, Wang said.

"Deflation is dreaded even more than inflation because it robs the system of revenue. It takes money out of commerce, further delaying an economic recovery," Wang said. "We must avoid the dreaded deflationary spiral."

The key to avoiding deflation? It's the same tonic necessary to correct rising unemployment, Wang said: finding engines of growth for the U.S. economy, and when they don't exist, creating them through fiscal stimulus and monetary policy.

"With the consumer pulling back spending, and business investment lackluster, it's up to fiscal stimulus and monetary policy, including quantitative easing, to generate demand and get the economy back on the growth track," Wang said. "Quantitative easing will add Federal Reserve funds in strategic institutions to keep money markets liquid and fiscal stimulus will increase GDP above what it would be by creating jobs for work that needs to be done, such as rebuilding the nation's infrastructure."

Economic Analysis: Economist Wang added that if the U.S. can keep prices from falling during the recession, that will be major victory. He's not talking about preventing price falls in areas that had bubbles, such as oil and other commodities: those price falls are corrective, and barring a total collapse in commodity prices, those declines will actually stimulate growth. What's to be avoided is a universal reduction in prices driven by a decrease in demand that's capable of contracting the economy further.