This depends on the assumption that people hold out on buying non-urgent goods in the belief that prices will continue to fall - leading prices to fall further. But in the current economic climate, almost nobody is buying non-urgent goods anyway. (Yet we have seen consistent inflation)
The current 'deflation' is primarily led by a sharp downtick in oil prices that won't be repeated - there's no immediate suggestion that prices will continue to fall.
With years of consistent inflation above wage increases compounding to give high prices, any deflation is just as likely to be seen by consumers as a relief from high prices - a good opportunity for people to spend the money they've been holding onto.
This is, in fact, credited in part to low consumer demand. Slack demand generally leads to job cuts, which leads to even slacker demand. That's the spiral they talk about.
> The current 'deflation' is primarily led by a sharp downtick in oil prices that won't be repeated - there's no immediate suggestion that prices will continue to fall.
This is why economists talk about core inflation, to remove as much as possible the influence of volatile commodities such as oil. Inflation will remain very low even with oil prices go up. Since 2008, inflation has actually at times been negative (i.e., deflation.)
People who think deflation is a good thing need only look at the Great Depression, Japan, the present Eurozone, and the 2008 recession. Just because high inflation is bad doesn't mean that deflation is good.
In addition, this incredibly low inflation happened in an environment with rock bottom interest rates and the fed basically printing money because you can't cut interest rates below 0.
Those moves were supposed to create hyper-inflation and be the reason for You to Buy Gold Now. Actually they barely kept us out of deflation.
I can only assume there is something that for most people just feels absolutely, intuitively true about more money = inflation = bad.
Since 2008, the Fed has increased the money supply by a factor of 5, inflation has been rock-bottom or nonexistent, real interest rates on Treasuries are negative, but hyperinflation is even now just around the corner. No matter how often the prediction is wrong, new ones are made and the failure of the appearance of hyperinflation on schedule is ignored or handwaved away with vague declarations about how the government is conspiring to hide inflation, or the Fed is using some kind of temporary monetary/balance-sheet magic trick, or as soon as the economy starts up again we're all doomed.
What I have never understood is why computer-technical types so often participate in this kind of thinking when we're usually pretty good on other sciences. To be sure, economics is a field with more cranks than usual - paid cranks, even-, but there are working, well-tested mainstream models that churn out accurate prediction after prediction and are largely ignored in favor of whatever the WSJ or Ron Paul says.
This depends on the assumption that people hold out on buying non-urgent goods in the belief that prices will continue to fall - leading prices to fall further. But in the current economic climate, almost nobody is buying non-urgent goods anyway. (Yet we have seen consistent inflation)
The current 'deflation' is primarily led by a sharp downtick in oil prices that won't be repeated - there's no immediate suggestion that prices will continue to fall.
With years of consistent inflation above wage increases compounding to give high prices, any deflation is just as likely to be seen by consumers as a relief from high prices - a good opportunity for people to spend the money they've been holding onto.