The cycle of inflation followed by deflation has been happening for hundreds of years. It happens because your banking and monetary systems are designed in a way that produces such an effect. What is happening today was inevitable. Only the timing of it was uncertain.
I believe, the fundamental cure, which could correct more than 50% of the cycle of inflation/deflation is .......... outlaw/repeal the fractional reserve lending system.
http://en.wikipedia.org/wiki/Fractional-reserve_banking
The fractional reserve lending system allows banks to create new bank credits (out of thin air), and then loan them out as if these credits are real money.
This kind of system is only stable when it is growing (inflating). Anything other than growth, can result in a cascade failure which leads to rapid deflation.
Here is a fun movie to explain the history and problems with the current banking/monetary system.
http://video.google.com/videoplay?do...2717158469419#