Thanks for your post, but I say respectfully that Prechter is wrong in his "deflation" analysis. Properly defined, deflation is a monetary term referring to a currency which is gaining value. That is certainly not what we are experiencing.

 

When currency value is stable, which is or should be the primary goal of monetary policy, prices respond to supply and demand. This enables prices to give clear signals to producers regarding whether production should be increased or decreased. When demand falls for a product, its price declines, telling the producer to cut production.

 

What we see presently is inflationary currency combined with collapsing demand. The inflationary currency conceals or muffles the signal to producers about how much to cut production. The Keynesians at the Fed (and the universities) purposely mix monetary inflation with collapsing demand to arrive at a soothing analysis which says both inflation and demand are relatively stable, but essentially negative. So they love to call it deflation with stable demand, instead of rising inflation with collapsing demand.

 

So, when Prechter is on the wrong track in such fundamental analysis (meaning he was taught or misled by Keynesians), I don't spend much time trying to find whether he's right on something else. I assure you, IMOO, the last thing we have to worry about is the dollar gaining value. Quite the opposite, in spades.