And yet you were wrong.
Inflation is why people keep going further and further into debt to maintain lifestyle.
Well, deflation will certainly teach those silly debtors.
You have yet to explain why a durable consumer good should appreciate in real terms.
You have yet to explain why a durable consumer good should depreciate in real terms.
Prices will drop and employment will eventually suffer. Debtors will default and anyone who holds hard assets will suffer. Business will reduce rather than increase production but that is not a problem according to you.
This on the other hand, are merely your assertions. I do all the explaining and fact finding and all you do is make assertions.
Effects of deflation
In mainstream economic theory deflation is a general reduction in the level of prices, or of the prices of an entire kind of asset or commodity. Deflation should not be confused with temporarily falling prices; instead, it is a sustained fall in general prices, or a sustained reduction in the velocity of money which increases the demand for money versus commodities.
Deflation is generally regarded negatively, as it is a tax on borrowers and on holders of illiquid assets, which accrues to the benefit of holders of liquid assets and currency. In this sense it is the opposite of inflation (or in the extreme, hyperinflation), which is a tax on currency holders and lenders in favor of borrowers and short term consumption. In modern economies, deflation is caused by a collapse in demand, and is associated with recession and long term economic depressions.
In modern economies, as loan terms have grown in length and financing is integral to building and general business, the penalties associated with deflation have grown larger. Since deflation discourages investment, because there is no reason to risk on future profits when the expectation of profits is negative, it generally leads to, or is associated with a collapse in aggregate demand. Without the "hidden risk of inflation", it becomes more productive to hold stores of value.
Deflation is, however, the natural condition of hard currency economies where the supply of money is not kept in line with productivity growth. Improving production lowers the price of goods, and population growth is faster than a slowly-growing money supply, from mining precious metals, means that there is less and less hard currency per person. In such economies, which include the late 19th century, hardship is caused, not by deflation per se, but by a reduction in money stock per person which is greater than the reduction in prices. This is why the long deflationary environment of the late 19th century could lead, simultaneously, to tremendous capital development, and tremendous deprivation for millions of people.
Hard money advocates argue that if there were no "rigidities" in an economy then deflation should be a welcome effect, as the lowering of prices would allow more of the economy's effort to be moved to other areas of activity, thus increasing the total output of the economy. However, there is no instance where this has actually happened, instead, deflation has, in every case, led to reduced investment demand - as holding currency becomes the most attractive and low risk investment, reduced consumer demand, as uncertainty about jobs and income grows, and ruptures to the financial system.
Different people and organizations are hurt by inflation versus deflation. Large debtors like inflation because it reduces their effective debt. For example, if Joe pays $100k for a house at 8% interest with inflation at 3%, he's effectively paying 5% interest on the loan. If inflation jumps to 10%, he's happy, he's now making 2% on $100k instead of losing 5%. However, Joe's bank hates this; they were making 5% but are now losing 2% on the loan!
With deflation, the opposite occurs. Joe pays $100k at 8% with inflation of 3%. Inflation drops to 0 then goes negative to be 5% deflation. Joe finds that more than not making 3% because of inflation, he's losing 5%. Overall, his effective interest rate has shot up to 5%+8%=13%. Joe's bank loves this situation, though, since they're making 13% instead of 5%.
Since deflationary periods favor those who hold currency over those who do not, they are often matched with periods of rising populist sentiment, as in the late 19th century, when populists in the United States wanted to move off of hard money standards and back to a money standard based on the more inflationary metal silver.
Most economists agree that the effects of long-term deflation are more damaging than inflation. Deflation raises real wages which are both difficult and costly for management to lower. This inevitably leads to layoffs and makes employers reluctant to hire new work, increasing unemployment.
Even a source as silly as Wikipedia knows more about deflation than you.