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Samuel Brittan cuts through some of the deflation non-sense. Quotable:

Apart from Japan, the industrial world has not seen deflation for 70 years. Once there is a single currency and a single monetary authority, inflation and deflation refer to movements of the price level of the whole area. To raise the alarm about possible German deflation, because the rate of inflation in that country has fallen to 0.6 per cent - against a euro area rate of 1.9 per cent - is simply to ignore the advent of the new currency. To talk about German deflation makes as much sense as to talk about deflation in Texas or Cornwall, unless you believe monetary union is premature or still immature.

In any case it seems inherently absurd to believe that a � per cent annual increase in prices is satisfactory, while a � per cent decrease spells catastrophe. Very often the difference between these low rates of inflation and deflation will depend mainly on the price index used. A � per cent rate of deflation based on the European Union's Harmonised Consumer Price Index usually translates into a � per cent rate of inflation on the British Retail Prices Index.

(via Institutional Economics)