Is deflation always bad?

Question

Is deflation always bad?

Answer 1

It can be.  If deflation dips so low that interest rates become negative, it will become more profitable for people to hold cash rather than save or invest it, so investment will fall and the economy in the long run will suffer.  It is also harmful to people who borrowed on fixed interest rates, which can cause political agitation (such as in the 1890s).  

But I don't think that short spells of deflation small in magnitude are always bad.

Answer 2

i agree

deflation is bad when the decrees in prices fall sharply or suddenly. but when it results from a increase in productivity it is not , just like inflation

Answer 3

Actually deflation is good, inflation is bad.  

Answer 4

It depend on what you mean by the word 'deflation'.  Some people confuse deflation with a decrease in prices.  And of course, a decrease in prices quite often is a good thing to have.

Deflation is usually defined as a decrease in the consumption of goods and services caused by a decrease in the amount of money people have.  Prices usually go down in such a situation.  But the unemployment goes up.  And so does the poverty within society.  Which is bad.

http://www.capitalism.net/articles/Anato...

Answer 5

Deflation is not good when it suddenly forces the equilibrium price for goods or services below their cost of production in response to dramatic changes in money supply by central banks.  However, gradual falling prices resulting from increased productivity and competitive pressures have beneficial effects on the economy as a whole.  It is the natural tendency of a free market.