>Your critique also applies to inflation. If a vacation that costs $1000 this year will cost $2000 next year, people have an unnatural incentive to purchase it

>Your critique also applies to inflation. If a vacation that costs $1000 this year will cost $2000 next year, people have an unnatural incentive to purchase it today rather than wait until they actually wanted to purchase it. While the family's vacation buying decision is changed indeed in both case, they end up making the economy better in the inflationary case, thereby increasing the real money value they'll eventually get back in wages from the increase economic activity. No one wants runaway inflation, but some inflation is better than any deflation. >Further, inflation means that you have no incentive to save money since it will be worth less in the future. Savings in general (as in cash in the bank) is not that valuable to the economy as a whole. Investment is much more useful. Savings (macroeconomically speaking) are only really useful for flattening out peaks and nulls in the monthly income vs expenses. >ou are making a broad generalization that deflation is bad, when in reality what I think you are going after is price stability. No, I'm not. Broad based inflation from too little money in circulation itself is extremely bad. You can have a LOT of inflation and still have a pretty good life, but the economy suffers under even a little broad deflation.