The few price falls other than real estate are mostly due to commodity prices falling after last year's bubble. The true measure of a deflation "zeitgeist" is when people postpone purchases because they think the prices will fall more later. Computer prices don't count since they always fall regardless of inflation mentality. The velocity of money can change very rapidly so once the inflationary boom kicks in it will quickly overwhelm the feeble fumbling Fed.
The fallout of monetary failure is never going to be monotic. Basically we will have a rapid succession of monetary booms and deflationary episodes until the financial breakdown as described in the article. Last year's commodity bubble was just a taste. The next will be higher and more damaging to the economy. Whether the Fed kills it with tighter money or it overreaches and and pops, commodity prices and credit will come crashing down after that so you will be able to talk about deflation again or, if the inflationary boom goes high enough, you will assign blame for the financial collapse anywhere but the Fed's excessively low rates.
Low interest rates are *not* the cause of the current crisis, and low interest rates will not by themselves trigger inflation.
Inflation could come from too much credit+cash creation, or inflation could come from a dearth of industrial/agricultural production (see Zimbabwe's farm seizures circa 2002 and Weimar Germany circa 1922 when France occupied Germany's Ruhr industrial region and all of Germany went on strike to protest).
Considering the destruction of credit availability and global surplus of manufacturing/agricultural capacity, however, inflation is an unlikely option.
In contrast, the opposite of inflation is a very real possibility. Deflation is how the Markets remove surplus capacity.
Got too many houses? Then you'll get home price deflation.
Got too many cargo ships? Then you'll get transportation cost deflation. Last year it cost $300,000 per day for a mega bulk ship to move iron ore across the sea. This year, it costs $25,000 per day.
That's not a typo. $300k down to $Twenty-Five K in a single year.
Making too many cars? Then auto prices will deflate. Deflation, by the way, is not only a reduction in prices, but also a reduction in the velocity of money. Less money...and it's moving slower.
Why didn't the U.S. see hyper-inflation in 1945 when we were printing more money than today?
Why hasn't Japan seen hyper-inflation since 1989 due to their printing of more money than us each year?
The pressure to obtain inflation is immense upon Geithner and his Central Banking friends worldwide, of course, as inflation devalues debt and increases the velocity of money.
But after a full year of pumping a spare $12.8 Trillion into the U.S. economy, we've seen...a PPI of -1.2% for two months back, and a PPI of 0.0% for last month.
Deflation...in the face of massive money printing. Why?
What factor explains it? (hint, I've repeated it non-stop above...I'm simply not spelling it out for the lurkers)