ok - we are getting nowhere here.
your argument for deflation going forward is that debt is going to contract. obviously the opposite should hold as well so you present examples of inflation during the boom times when indebtedness grew rapidly as:
1. corn. ever heard about the ethanol policies fuck up?
2. rice. this was largely asian phenomenon and guess why it happened. people became richer so they eat more. supply gets disrupted by bad monsoon seasons and bingo - supply/demand problem. note that on top of that the debt is not a big problem in asia (or at least not as bad as West)
3. gasoline. this is more tricky but the biggest reason why crude went to $147 was Fed's accommodative policy following the housing (and Bear Stearns) fiasco. Oil simply became an inflation hedge for too many people. so it was really a result of accomodative Fed's policy affecting assets, i.e. asset inflation. NOTHING TO DO WITH DEBT. in fact this is the great counterargument against theory of endogenous money to have privileged effect on price level.
4. houses. asset inflation channeled by cheap money worldwide and fucked up regulation. this one is the only one clearly connected to debt because the ownership is often gained via a mortgage.
and sure houses have a potential for more declines as supply exceeds demand for extended period of liquidation and weeding out the "unworthy". the resulting credit crunch has effect on price levels as people adjust their balance sheet by temporarily reducing demand.
back to the original topic. the bottom line is if you try to get out of problems by printing money instead of biting the bullet you ultimately get inflation because demand for goods will exceed supply.
along the way you get plenty of asset inflation as well as people wake up and try to defend their wealth. don't rely on velocity to save the day...americans have completely different demography and consumer behaviour then e.g. Japan (which is often quoted as a counter-argument).
don't get confused by the large ratio of debt to cash. debt is not driving the price level as much as cash does. what really matters is the disposable income (and this is being pumped up by low interest rate, government spending, cheques, tax rebates etc) vs supply (which is suppressed to say the least). we will see if we get a stagflation deja vu...
money printing is only postponing the inevitable restructuring (of economy, debts, etc) by stealing from prudent people their savings - basically exactly what faber is saying btw. i certainly am his fan.
at the end of the modern history we will all be monetarists. as milton friedman once said "inflation is always and everywhere a monetary phenomenon."
(he meant overall price level - not the substitution related stuff related to supply/demand imbalance in a particular product)
ouch - that was long - lets' see how many nonsense i spewed out....