"With a Treasury bond, you earn the bond’s yield, the deflation return, and the capital appreciation return from bond yields going down (as the Fed eases)."

I think that "and" should be and "or." The only way to benefit from the capital appreciation of a bond is to sell it, thereby giving up the other benefits. If you hold it to maturity, you get par. That may include some discount amortization if you bought bellow par, but it isn't really "appreciation" from a change in interest rates.

The discussion of deflation is excellent. If you play it backwards, and you can see the benefits of modest INflation with its incentives to spend and to borrow and lend.

As for whether deflation can occur, I worry that it can so long as our idiot Congress worships the great god Pay-for. Deflation implies abundance, and abundance calls for increased deficit spending, not cash-neutral spending that does nothing to stimulate the economy. How can you stimulate the economy when you take as much out of it in taxes as you are putting in?

I understand the argument that the government will tax "non-spenders" - aka the rich - but there really is no such thing. The rich buy investments, and the businesses they fund spend money on goods and services. Take that money from the rich, and their businesses cannot spend it. The government will have to embrace Modern Monetary Theory - even if it pretends not to - or we WILL have deflation.