That is all correct, but don't look for any deflation in this lifetime.
Deflation just means that prices deflated. Well, prices on homes and stocks are quite a bit down from their peak. They've deflated.
Salaries are down. And because employment is down, wages and overtime hours are down in aggregate.
Less credit being available generally brings prices down, too.
Stocks and homes are big-ticket items. So are salaries and wages.
They are all down.
Oil has fallen from $147/barrel down into the $50's.
Copper is half of its peak.
The daily rate for supertankers making the crude run from Saudi Arabia to Japan has plunged from $177,000 last year to $16,000 this month.
That's substantial deflation.
I don't know...maybe you could find some grandma to tell you that she's paying a few pennies more for milk...but not much is going up in price compared to the peaks last year.
Deflation is here in a big way.