I think he was simply stating that if the network & demand for Safecoin is growing at a faster rate than the rate of money supply growth, there will be deflationary pressure (price for network resources will go down in terms of Safecoin). If the Safecoin supply increases at a certain rate, that deflationary pressure will be decreased to some degree, which I don’t think is a special case of deflation.
I’m also interested to hear why it’s important for the supply to be increased.
It seems to me that the only clear reason to do this is to ensure that investors are diluted; farmers who contribute to the network are rewarded in the long term more than those who just put money into the system. That makes some good sense, but I’d like to know if it is the motivation. If this isn’t the motivation, I think it’s cleaner to just let a market emerge without any supply change, as the network’s resource market needs to work once supply is no longer increasing anyway (and the upside of token holders not getting diluted if it’s not needed).