Thanks.
Something was bothering me about the definition that Expat cited. I figured it out -- that definition (and there are many others like it), goes beyond just
defining deflation and includes speculation on the
results of deflation. On even further reflection, I find that I can't completely agree with
any part of that definition.
Let me offer my preferred definition first: Deflation = a state of falling prices. Now, compare that with the one Expat cited.
Economics) Economics a reduction in the level of total spending
Sort of right -- but, there's an implicit assumption that growth in aggregate demand does not at least match the reduction in average prices. That assumption is simply not supported by economic history.
and economic activity resulting in lower levels of output, employment, investment, trade, profits, and prices.
Now, the assumptions are becoming quite explicit. Once again, these assumptions are not supported by economic history. Sometimes that's the result -- sometimes it isn't. The cited definiton is really more of a definition of a "deflationary sprial" -- while that's not a good thing, it is not the inevitable result of lower prices.
If we were to accept the definition that Expat cited (note: I am not saying "Expat's definition"), then there is nothing to debate. Nothing is left but a tautological argument: deflation is bad, because it's bad by definition.
If we stick to the narrow definition deflation = a state of decreasing prices; then we can debate what comes next. That's what we've been doing here.
To use an analogy derived from a childhood literary classic: too much deflation makes the economy too cold; too much inflation makes the economy too hot; a little bit of one or the other makes the economy just right. (I know that's simplistic -- no analogy or metaphor is completely right; but some are useful.)