@graphite: you’re very much wrong: just look at what happened in 2008: gold collapsed from 1000 to the 700 if I remember correctly.

@Mr. Nobody: you are very confused. Price in Tokyo are extremely high in $ terms as a result of yen deflation and the doubling of the Yen against many major currencies in the past 2 year.

Have you ever been to Japan? Or are you just carrying around news from CNN?

When I was in Japan in 2004 and 2005, life over there was very cheap for me compared to London.

Also, real estate and equity markets are in nominal terms between 50 and 80% lower than their peak.

PEJ - Deflation, like inflation, experiences non linearity when Government’s hands and Fed’s printing presses and people’s arbitrary spending habits are working. People who cite ‘credit contraction’ and ‘free falling real estate prices’ provide compelling evidence of deflation, but neglect to explain, for instance, why food prices keep rising. Why is it that we don’t see deflation in health care costs or Government wages or movie tickets?

Point being, even if you have 100$ in credit contraction and 20$ in money creation doesn’t mean that you will have $80 in deflation. B/c the uneven flow of both, you can have something deflate by $100 (like a house), while other stuff (like food) becomes more expensive — Take that idea further, and you’ll see that a fall in the prices of houses is no panacea for poor people who still have their mortgages and have to feed the family. Free money/liquidity has to find a home — net deflation is ignoring a blatant fact, that money creation goes into things like food, gold, stocks, etc even during great deflation in credit markets. You cane ‘deflation’ with many commodities/services/etc appreciate in value.

Last I checked, Japan had insane deflation, even with crazy stimuli, with their Nikki down 75% over the past 20 years. And yet, Tokyo is still one of the most expensive cities to live in.