Deflation has been pictured as a much greater curse than inflation, even runaway inflation. But when there are too many goods being pursued by too few dollars, this is but a means to take up slack in the market. Deflation is simply not in the lexicon for minds habituated to thinking there shall always be greater dollar value on goods and services tommorow than there is today. And over the very long range, this is correct. If the real currency, the worth of the person's time, is measured agains the volume of goods and services purchased, it still takes a certain ratio of hours of productive earnings to the level of the delivery of goods and services. This does not substantially change.
Inflation is built into the monetary system, otherwise, banks could not pay interest on deposits, or even collect interest on loans. Deflation is essentially a negative rate of interest, that is, the dollar value is LESS tomorrow than it is today. But the ratio of hours worked to obtain a specified level of goods and services remains about the same.
"Inflation is built into the monetary system, otherwise, banks could not pay interest on deposits, or even collect interest on loans."
Nonsense. Interest is charged and paid because a dollar paid today is worth more to a person today than a promise to pay them a dollar tomorrow. Inflation simply adds a constant to the interest rate.
"Deflation is essentially a negative rate of interest, that is, the dollar value is LESS tomorrow than it is today."
Wrong again. Deflation means the dollar gains value.
Deflation, however, doesn't simply subtract a constant to the nominal interest rate, like inflation adds one . If the dollar is appreciating X% annually, someone with cash can get an X% return just by sitting on it, without lending it or doing anything productive. Conversely, even a very safe borrower has to pay at least X% in real interest. The effect then is to contract the total volume of credit extended or taken on, rather than a simple adjustment to the nominal interest rate.