[Alberta's Child]

Not only everything you said, but when money can no longer make money, there is no incentive for folks to save for future needs. The middle class can NEVER come back if people who are responsible about their finances can't accumulate some wealth.

I'm not sure this is really a financial problem. Real wealth doesn't exist in cash, but in assets that can be used productively and/or can grow in value. Interestingly, it's much easier to build "wealth" with cash in a deflationary environment than at any other time -- since the nominal value of the cash will grow even if you just bury it in your back yard.

How quickly we forget that inflation, not deflation, erodes the value of money over the long term.

[grania]

These deflationary times don't exist for people who don't drive much and their basic necessities keep increasing in price. Do you have any idea how many people, even many with decent jobs, are getting trapped by insurance and copays, utilities, basic foods inching up a little each month?

There have been plenty of reports that the middle class is on its way to extinction in the US. The strength of the US and most any vibrant economy is a confident middle class.