So a GM worker makes $60,000 a year and deflation forces GM to drop his wage 3% each year. You think the UAW will cooperate? The mortgage on his $300,000 house doesn't shrink 3% but the value of the house does. How does his grocery bill shrinking by 3% help him again?
If he has to move after 10 years his house is only worth $221,000. His salary is now $44,245. Doesn't seem like he built any equity in the house. Does he have enough for a new down payment? You think people might be leery of making big purchases that drop in value every year?
Your debating has got to the point of pointing out the mote in gold's eye and ignoring the log in the Federal Reserve's.
I just can't get past your idea that deflation is no big deal.