The scientific/economic problem with deflation is that deflation destroys the entire “Buy and Hold” business model.
You can’t buy a house, lease it out, and live to tell the tale if the value of the house deflates by more each year than your rent brings in.
Ditto for stocks and their dividends.
What’s left if the Buy-and-Hold model is gone is a “cash flow” business model. Used car dealers and computer chip makers (cell phone makers, too) use the cash flow model.
But losing an entire Buy-and-Hold business model is dramatic.
Thus, preventing deflation was the original goal of fiat currency.
Later, central banks were created to manage fiat currencies to again prevent deflation.
Each generation claims that deflation has been conquered by the printing press, government, and central banks, yet deflationary spirals seem to re-occur (1893, 1929, 2006).
Certainly *debt* is deflationary. Have governments conquered debt yet?!
I do think, however, that DEflation is generally a product of the investment environment (as exacerbated by goobermint, to be sure) offering too few opportunities for investors to earn an honest return on capital relative to the risk implied by the investment, whereas inflation is invariably a product of overexpansion of fiat 'money', or, as Dr. Friedman once so accurately said: 'Inflation is everywhere and always a monetary phenomenon: a matter of too much "money" chasing too few goods.'
Thus, preventing deflation was the original goal of fiat currency............Later, central banks were created to manage fiat currencies to again prevent deflation.
Each generation claims that deflation has been conquered by the printing press, government, and central banks, yet deflationary spirals seem to re-occur (1893, 1929, 2006).........Certainly *debt* is deflationary. Have governments conquered debt yet?!
The problem may just be that the methods of fiat-money-management cannot, under any circumstances, be "perfectly" managed and therefore the fiat-money-management cures themselves produce (eventually) inflationary conditions that only deflation can cure, as painful as that medicine may be. IF that is the case (I don't pretend to know that for sure), then the world needs to disabuse itself of the notion that fiat-money-management can prevent inflation-deflation cycles.