What he's saying is that new dollars don't have to enter the economy. If you remove one penny and inject 100 penny pennies, you've only split up the penny, nothing else. With electronic banking this doesn't even have to be anything, as you can just work with fractional dollars (yes I know current software doesn't work like that, but it could).
And I agree with that as well. There might be some psychological issues switching to a deflationary system, though. Things that typically appreciate in nominal value (real estate, job skills, precious metals, art, etc.) will be appear to not be appreciating, even though relative to everyday goods in services, they will still appreciate. The only problem is that you can't have too much deflation, or else people will want to hold onto cash too much, will they not?
