Judgment regarding inflation or deflation

Mish has been a consistent prognosticator that the economic crisis ends in deflation. In a recent post he quotes David Rosenberg who supports his position:
“We are certainly in a deflationary state,” said David Rosenberg, chief economist and strategist with Gluskin Sheff and Associates in Toronto. “Of that, there’s no doubt. I think people still have no clue as to just how weak the economy is,” Mr. Rosenberg said.
There are many in both camps of the inflation-deflation battle. Knowing how this ends is important because of the long-run investment implications. I believe that the government, unequivocably, is attempting to engineer inflation. But knowing what they are aiming at is not enough. Their track record in all areas is quite abysmal, rivaling the Keystone Cops. Final results are often 180 degrees from intended.
I believe it is still too early to make a final judgment regarding inflation or deflation. Calls made now are only predictions. As Rosenberg points out, some prices are declining. That, however, is a symptom of deflation rather than deflation itself.  Other prices are increasing (symptom of inflation), financial assets being the most obvious . The Fed is flooding the system with liquidity (inflation), while credit implodes (deflation). In the battle between Fed liquidity injections and market credit contraction, the Fed is currently behind. Whether the final score reflects that or not is still moot.
Apparent deflation at this point is not necessarily inconsistent with future deflation or inflation. An unrecognized adjustment downward in the standard of living is often mistaken for deflation. I think a lowered standard of living for this country is inevitable. My guess is that inflation, some time in the future, is also.