Actually how can deflation not be most likely? Think of it this way..... Tom has no savings......any money that he buys things with, he simply borrows. There is only one item that Tom can buy....it is called a house. There are 100 Toms. The most that a Tom can borrow is $100,000. Thus the highest price for a house is $100,000. ...................................................................................................... But things change..... The banks will now only loan to 50 Toms. The most that a bank will loan a Tom is $50,000. .................................................................................................... Thus all houses are now worth no more than $50,000. ................................................................................................. The prospective valuation loss is 50 X $50,000 plus 50 x $50,000..... The total previous valuation was 100 x $$100,000.... Now the total valuation is $50,000 x 100....... ..................................................................................................... Half the total previous valuation has evaporated. This is DEFLATION....... ............................................................................ Coming to the theatre near you.........
There is actually a good argument for deflation. Homes and available credit vs the dollar and commodities. That's the struggle. Think of it as a war. If the rest of the world slows enough, you will see deflation. Personally, I don't see it happening on a large scale, and it will take awhile if it even happens.