I agree with you that a deflationary event is coming. But do you think central banks won't react ?
the deflation will overwhelm them.
I am with cypherdoc on this one. To compensate defaults (deflation) they are continuing to reduce bank's reserve requirements. It is effectively 0 or even negative already. The more they reduce reserve requirements the more difficult it is to fight deflation. Given that so many banks and now governments, particularly in Europe, are de facto insolvent right now, while PIIGSominoes keep falling right on schedule, this is unsustainable. There is data out there that QE's have diminishing effect. The game is up and deflation is upon us. All assets but cash will fall in this scenario, gold and stocks and in most countries housing are the first to the block.
Moreover, the market has a tendency to inflict the maximum possible damage. It's so called "max pain" theory. See how everyone and his mother is into the gold right now and into shorting fiat by borrowing a lot. Everyone is playing the inflation card with ever increasing leverage, which basically means that there will be deflation to hurt the maximum possible number of people.
The worst thing one can do in deflationary environment is to be a debtor whose debts are secured on his real assets.
