There is both understanding and error in your statements. Deflation is here and now, and has been happening for at least a year. What the Fed does has little bearing on that now, and arguablely never could have.
http://www.nfib.com/Portals/0/PDF/sbet/sbet201009.pdfCheck out the first and second charts on page 10. Your thinking of total base currency, basicly M2, as your judge of whether there should be inflation or not. However, the majority of transfers in the US isn't currency, but credit. So a better measure of future inflation is the trend in M3 (M2 + credit), which has been in freefall for two years or more, the massive currency creation by the Fed notwithstanding. Our near term outlook is all deflation, all the time, for as far into the future as I am willing to guess.
Note that I did not say that deflation did not happen. I said that the Fed aborted the "deflationary correction".
About what you are saying, there has been monetary deflation for sure, specially in the longer term debt (M3) towards cash or shorter term debt (M2). But if the Fed had not monetized government debt (pushing new money directly into the market) it would had been far more intense.
As for prices, consumer goods prices, the CPI which is usually what is referred as "prices" when talking in macroeconomics, have not gone down. If you look at shadowstats statistics is even worse, and they have been increasing around 5%. Sure, homes have gone down, stocks have gone down, etc... but the articles that people buy everyday, like food, have not gone down, and have keep going up, slower than usually, but still up.
I have checked the statistics in page 10 of that report, and yes its a big decline, but it seems to include all goods and only small business. Its interesting data, but it does not represent the whole thing.
And I am not denying there are deflationary presures. I believe the deflationary correction is going to start showing again (its already showing) until the Fed starts printing again on what its being called Quantitive Easing 2. Then prices will start rising again and heavily. Note that I am saying that prices will rise, not that the economy will recover, therefore stagflation.