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?
Isn't that your contention, that prices will drop and that this is deleterious? You said the price of sold goods (someone sells all the goods that go into making a car) and salaries will decline.
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.
You do in a hard money environment when the government and the banks aren't inflating the money supply and destroying the value of same, no different really than how businesses have to try and factor for inflation now.
And when housing drops year after year, it probably isn't a wise investment.
You want to sleep under the bridge? I plan to sleep in my house. I'll have it long after I've paid it off, and even if I chose not to make higher payments I'd still have it to sleep in during the length of a the mortgage. You seem to ignore the utility of a house (the actual reason someone should buy one).
And when deflation crushes the debtors and they default and their banks fail, does that increase savings?
Are you unaware that the savings rate has increased since the recession began? Households are trying to repair their balance sheets and provide a more sustainable foundation for economic growth, meanwhile the government is borrowing even more, worsening the overall environment.