Should we worry about deflation?
Should we be worried about deflation? Answer: no. Deflation (conventionally defined) just means gently falling prices. What's wrong with that? Falling prices are a boon for consumers, eventually, but more importantly falling prices are a boon for producers now who get to take advantage of lower costs to regenerate their businesses again -- in short, falling prices are necessary for the market to correct, as it is.
Deflation, in fact, is a "great liberating force," writes Jörg Guido Hülsmann, "because it destroys the economic basis of the social engineers, spin doctors, and brain washers." It rewards Mr and Mrs Saver, who've delayed spending now with the expectation of spending later, and punishes Mr and Mrs Profligate, whose spending has been part of the reason we're now all suffering.
The reason that unsound economists rail against deflation? Because they think Mr and Mrs Profligate drive the economy. But they don't, as I'll show you tomorrow.