"Deflation" this time around will not result in falling consumer prices.
When the big deflation comes in US Treaasuries, which will be triggered by Japan selling off to fund their looming fiscal crunch, the Fed will monetize (inflate FRNs) to keep interest rates down. If they don't, the US government will go bankrupt as most of the US debt rolls over every 5 years and rapidly rising rates will devour the budget. If the Fed does not inflate FRNs to soak up crashing Treasuries, then Congress will take over the Fed and 2010 republicans will hyperinflate by decree.
There will be no deflation in consumer prices. Sorry. The mass-inflation is already here. The stock market/real estate market is being reflated by TARP/GSE cash infusions and Fed outright purchases. 2 of 3 automakers are utterly insolvent yet still have $Bs in market cap. Oil, gold, silver are on a rocket.
Mass inflation is here. We are in it. Next stop, $4.00 gas.
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