Bailouts, Inflation and Deflation

Following the UK and US bailouts, what now lies in store? I found this post on seeking alpha very easy to understand:

Depression: Inflationary vs. Deflationary, and What It Means For Traders

The market is trying to remove the excess capital that was injected into the market, and return the money supply to a reasonable level by forcing bad investments to fail. This naturally causes asset prices to fall, particularly in areas where the malinvestments were made (housing, financials).

If the market were left to its own recourse or with minimal intervention, we would have a deflationary depression. This would result in a tightening of the money supply, which would likely strengthen the US dollar, and affect correlated markets accordingly — meaning sending oil prices and gold prices down (this is of course assuming that all other factors constant — i.e. demand and supply of oil — were to be held constant). Areas of malinvestments — most notably the housing and financial sector — would represent opportunities for short sellers.

When bailouts do occur, it is an attempt to expand the money supply, so that the pain of deflation does not need to be experienced. This results in further currency devaluation and inflation.