Actually, technology leads to lower prices in practically all goods as productivity increases. Prices only rise when the productivity increases are swamped by monetary inflation.
Borrow a few billion to build a new factory. Now run your financial projections with your revenue declining 3% each year. Say your profit is $3000 on each $20000 auto. Next year your cars sell for $19400. The next, $18818. Then $18253. Then $17706. What's your profit margin per unit now?
$2576 give or take the portion of costs derived specifically from carrying debt. If prices are declining across the board, so are the input costs in making more cars. When one makes a capital goods investment, you do so calculating the expected return on that investment. If the return is ultimately less than the cost it isn't a wise investment, and shouldn't be made (the market is demonstrating via the price signal that those resources are more highly desired elsewhere in the economy).
You're confusing price drops from increased productivity with price drops due to deflation. Did his sales increase during the Great Depression?
Here's the nub, price drops under a gold standard are due to increased productivity. As the pool of goods grows faster than the money supply prices drop. The money supply doesn't stop growing, it just grows slower than the production of other goods. The deflation scenario you reference (the Great Depression) was a collapse of credit consequent to the malinvestments set in motion under preceding boom (when the Federal Reserve set interest rates too low). Benjamin Strong's efforts to help the Bank of England fake the gold standard is entirely responsible for the profusion of credit that was ultimately unsustainable.
The nominal reduction won't help you pay off your existing debt, will it?
Exactly, so don't utilize debt for consumption, only utilize it for productive purposes where the return is higher than the interest borne.
Try not to crush the existing debtors and kill their banks while you're encouraging savers. There appear to be more debtors and they seem to be involved in a lot of the production in the country.
The profusion of debtors is this country's largest problem. We're devoting more and more of today's production to affording yesterday's consumption. Instead we need to be setting aside more of today's production to support tomorrow's production. One way is the path to eventual destitution as the debt burden requires lowering present standards of living (to pay for yesterday's indulgence), or repudiating the debt (robbing those who saved and loaned you money) [can you say: Greece?], the other promotes the accumulation of wealth, and enables higher living standards in the future.
"Another debt-by-the-decade study done by Ned Davis Research showed the amount of debt it took to generate the total GDP for the decade. It showed the total debt to generate the total GDP for the decade of 1949 -to- 1959 was $337.6 bn. to generate the $248 bn. of GDP or Debt/GDP of 1.36. (The ratio essentially shows how much debt it takes to generate $1 of GDP). The ratio from 1959 to 1969 was 1.53, the ratio from 1969 to 1979 was 1.68, 2.93 from 1979 to 1989, 3.12 from 1989 to 1999 and 6.02 from 1999 to 2009."
This is not a sustainable model, and you're witnessing its failure across the globe.
All input costs are dropping?
When one makes a capital goods investment, you do so calculating the expected return on that investment.
And usually you don't expect to be forced to drop your prices 3% each year, while your debt becomes harder and harder to repay.
If the return is ultimately less than the cost it isn't a wise investment, and shouldn't be made
And when housing drops year after year, it probably isn't a wise investment.
The profusion of debtors is this country's largest problem. We're devoting more and more of today's production to affording yesterday's consumption. Instead we need to be setting aside more of today's production to support tomorrow's production.
And when deflation crushes the debtors and they default and their banks fail, does that increase savings?