I've not commented much on this board, and none at all on the inflation-deflation debate. That said, I have noted (I think) that the discussion here has not touched enough on the importance of the U.S. being a massive external debtor.

Its hard for me to imagine that U.S. external debtors will simply sit on their hands (hold U.S. debts) and watch the U.S. go into any serious deflation. Deflation, of course, by one definition means falling prices and almost certainly then falling tax revenues, and in turn a declining ability for the U.S. to pay external debtors.

If I owned debt issued by a furniture store, and I could monitor the parking lot, and see the customer base dwindle, I certainly would try to unload the debt to some other sucker.

What happens then to the U.S as tax revenues (now vastly insufficient) drop again in say a double dip recession? Well, at least if I were China (or any other U.S. creditor), I'd try to dump - especially if other creditors were - some of the debt and buy something more solid. Personally, if I were China, I'd rather have something like the U.S. corn or soybean crops.

I'm not trying to predict the outcome of inflation/deflation in the years ahead, only trying to point out that such a discussion must deal with how U.S. creditors will be responding and what that means to prices in the U.S. "in the end."