CPI just declined a full 1% in October. This means we have had -1.5% deflation in the last three months. The Panic of 2008 is officially the first deflationary bust in almost 60 years.
As I have explained previously, every time there has been 1.5% deflation or greater, going back almost 100 years, we have been in a deflationary recession.
The good news is that year over year inflation is 3.7%, a decline from 5.6% in July. Producer prices have declined more dramatically, from 9.8% to 5.1%. Both of these should continue to decline for the next couple of months (due to predictable seasonal factors plus continuing declines in Oil). Per historical patterns of how recessions end, IF money supply continues to expand, and PPI continues to decline more than CPI, we will more likely than not see a recovery by July 4, 2009.