Sorry I missed the discussion, I don't frequent this board much anymore.
I don't want to talk about deflation too much, several on this board do their best to squash any reasonable discussion, and that's no fun, but here goes a little.
We're certainly experiencing deflation already. Housing is deflating rapidly, 15% so far nationally, this will probably bottom out at 40% nationally unless it overshoots, I think the number is to the tune of a few trillion so far. All the bank writeoffs, over 500B so far, which will go to 1T, possibly as high as 2T - that's very serious deflation. The stock market is deflating, something like 2T so far. What else, I've heard that bonds, excepting the highest quality Treasury/Agency bonds, are suffering the same, but I haven't verified that. You can look at the various monetary indicators (MZM and the like), and velocity to see what's happening to money, it's slowing down and deflating.
Now the talk about CPI - that's peanuts. Due to more speculation than anything fundamental. And with where US consumers are I believe that'll turn around too.
Here's an excellent discussion
http://www.hoisingtonmgt.com/pdf/HIM2008Q2NP.pdf
Simply, the last 25 years of leveraging up is now in the process of painfully deleveraging, which is deflationary.
Somebody mentioned the FED, the helicopter idea is misplaced. The Fed can't force anybody to borrow or lend, and they can't lend permanently. Anyhow during the credit bubble the Fed played a small part of money creation the past decade, it was all from what PIMCO's Paul McCully calls the 'Shadow Banking System' (banks and near banks).
As for investing for deflation, selling assets and getting out of debt is the best thing. Second best thing is own the highest quality/longest duration bonds you can get, 30 year treasuries in the US. I sold my house in 2005, and stocks in 2006 - a bit too early as it turned out for the stocks. Due to the credit bubble stocks went up nicely, but I judged it wasn't due to fundamentals but the peak of another bubble. At any rate, two years later, stocks are back where they were, and my bonds have returned maybe 20%. Compared to the house and stocks I sold to buy the bonds, I'm up about 50%.
Stocks are probably OK when IN deflation, but on the way to deflation they're not so good to own, which I think we've been seeing already.