I don't see how any reasonable person with knowledge of current events can disagree that there has been a contraction of both in the global money supply.

Well...  I will agree with your point, in principle.  I'd say printing money would be an arguing point as to just how contracted it's become.  But my point is not that deflation isn't bad.  It's that inflation is bad, and this contraction, very often wrongly called deflation, is a market correction.  Real deflation, is bad.  Very bad.  And, in fact, prominent Austrian Economists have made that point very clear.  That's why calling what we are seeing now "deflation" can be detrimental to conversations about our current situation.  Hayek had said this himself .

Hayek (1937, p. 93) was as strongly opposed to contraction in nominal
income as he was to excessive expansion:

Whether we think that the ideal would be a more or less constant volume of the monetary circulation, or whether we think that this volume should gradually increase at a fairly constant rate as productivity increases, the problem of how to prevent the credit structure in any country from running away in either direction remains the same.

Hayek’s ideal (ibid.) was not a do-nothing monetary policy but “an intelligently
regulated international system.”6

It is important to understand that Austrian economists are not the "do nothing" crowd.  But Austrian economists do advocate a correction, as quickly as possible, of the effects of poor monetary policy.

In the “Austrian” diagnosis of the boom, credit expansion drove the interest rate artificially low, luring labor and capital into overly “roundabout” investment projects that would prove unsustainable when the interest rate returned to its natural level. Hayek (1933c, p. 178) concluded that the typical recession was an equilibrating process leading to “the re-absorption of the unemployed productive forces – men as well as equipment” into sustainable uses. The “readjustment of the economic system after a crisis” was a “process of liquidation which restores some sort of equilibrium” (Hayek 1933c, pp. 175, 174). Business bankruptcies – liquidation in the narrow sense – might be a necessary part of the process, but these were of secondary importance to the reallocation of the factors of production (Hayek 1933c, p. 175):

The analysis of the crisis shows that, once an excessive increase ofthe capital structure has proved insupportable and has led to a crisis, profitability of production can be restored only by considerable changes in relative prices, reductions of certain stocks, and transfers of the means of production to other uses. In connection with these changes, liquidations of firms in a purely financial sense of the word may be inevitable, and their postponement may possibly delay the process of liquidation in the first, more general sense; but this is a separate and special 12 phenomenon which in recent discussions has been stressed rather excessively at the expense of the more fundamental changes in prices, stocks, etc. 9

Both Hayek and Robbins later admitted that allowing wages to fall was the wrong thing.  Prices should have been allowed to fall from their inflated levels only so far as to keep from affecting nominal wages.  And I think that's your point about preventing a complete collapse due to a loss of all confidence.

 The irony is that on 9/11 the terrorists took down the World Trade Center. That failed at stopping the US economy from carrying on. The WMD that blew out our financial system came from within.

I disagree.  Greenspan's policies, in response to the reaction of American consumers, played an enormous role in what has been happening.  While I don't think the terrorists had this particular scenario in mind, they certainly (inderectly) had a much bigger impact than simply taking out a few buildings in New York City.