Is Deflation Good or Bad?

It is neither good nor bad. What would matter is what has caused deflation? And whether people will suffer or rejoice?

If the cause is increasing supply of goods that would be good like productivity went up and everything became cheaper and affordable. However, if deflation comes from decreasing supply of money, as it had come during the great depression, then it would be painful for all.

During depression, stock market crash removed liquidity out of the market place, this cause the economy to shrink, which consequently resulted in loss of job for many people.

Then banks topped loaning money because people were defaulting. The problem compounded when more people lost their jobs and money supply reduced even more.

So deflation can be caused by several different things and thus can be good or bad depending on the cause.

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