My take on the 1954 definition (cut n paste job from the John Lennon thread):-

"Folk music is the product of a musical tradition that has evolved through the process of oral transmission"..."...music that has been evolved...by a community uninfluenced by popular and arts music".

This being the case, it would follow that new folk songs can only be created in cultures where music playing/recording technology is wholly absent; and furthermore untouched by mass popular culture.

Um, I think that only leaves the interior of Papua New Guinea and maybe the remoter parts of the Amazon rainforest...not a very positive prognosis for the continued existence of a living folk tradition in the Western world!

Here endeth the lesson.