<p>The prospect of broad spectrum deflation should frighten us all a lot more than moderate inflation. Take a look at Japan’s economy over the last several decades and you’ll see why. Suppose, for example, that you own your home and you’ve got another twenty years of mortgage payments to make. You’re contractually obligated to make those payments and they don’t decrease – but in a deflationary economy the value of the house that you’re purchasing with them over time DOES. Deflation is a vicious cycle – people think that prices are declining, so they put off making purchases thinking that they will get a better price. The problem with that is that deferring purchases hurts the economy and reduces demand even more. No consumer demand, no growth in manufacturing/services/retail, etc., business bankruptcies increase, layoffs and job losses increase, unemployment increases, purchasing power decreases. It’s not a good thing.</p>