Stoneleigh
You and Ilargi do a great job with "The Automatic Earth".

Regards,
Gunga

In the interest of presenting both side, it must be noted that the federal reserve will do everything in its power to see to it that the deflation Stoneleigh is describing does not occur. They even published what they plan on doing to stop it back in 2003. And they have pretty much stuck with this script.

"Monetary Policy in a Zero-Interest-Rate Economy". (pdf format)
http://www.dallasfed.org/research/indepth/2003/id0304.pdf

"Policy-makers can find themselves in serious trouble if they come up against the zero interest-rate bound during a period of falling prices–that is, during a period of deflation. That’s because what ultimately matters to households and firms is the real cost of borrowing–what economists call the real interest rate."

Lots of good stuff in it showing what the fed will/is doing. Nice graph on page three, showing how the high deflation rate of the depression was followed by a period of double digit inflation.

I wouldn't go so far as to say that there is a “plan” or a “conspiracy”, but it would appear that everyone in the fed/government knows what options are available and as each one fails, they just move on to the next.

Next up will be “The goods & services solution”. From the Fed paper:

“The strategy can be implemented, however, by coordination with fiscal policy-makers. The Federal government, for example, could purchase goods and services and finance the purchases with new debt, which the Fed in turn would buy–in technical terminology, the Fed would ‘monetize’ the resulting debt.”

As to whether inflation or deflation wins? My guess is both.