My two pennies worth : is that the **deflation** we are seeing is simply an inventory shock... excess manufactured inventories being sold down at huge discounts turning into empty cupboards as demand rebuilds.
While demand will not be as high as before, maybe 80-90%, the supply side will also be substantially lower as inefficient producers are forced out or delays in capex/mine startups. Which leaves us with the same supply constraints as before the crisis...
Also, Japan is a special case where deflation is a function of Japanese cultural behaviour... and should NOT be assumed/expected to affect other cultures. inside knowledge on the Japan thing :-(
Japan's current deflation problem should not be used as the historical reference point for global economies... (though it is politically **very** attractive as it justifies giving money away to buy votes...) the 1970's stagflation environment is closer to the actual outcome in reflecting the underlying global behaviour.
If the US & other countries continue to assume that deflation is a long term problem and not simply a short term inventory shock, then we will be in **alot** of trouble. Inflation **will** rise strongly hand in hand with unemployment.
The below article from the FT is interesting.
Long View: Surreal goings on in the commodities show http://www.ft.com/cms/s/0/67f01ce2-5776-11de-8c47-00144feabdc0.html
