Actually, a 5% return looks BETTER not worse, when there's deflation - you're getting the return, plus the base value of the investment which later can buy MOR

Actually, a 5% return looks BETTER not worse, when there's deflation - you're getting the return, plus the base value of the investment which later can buy MORE. In your example the investment would allow buying 10% more later, the mattress-money only 5%. Actually getting that 5% will likely be more difficult though. When there's inflation, you're return has to match the inflation rate for you to effectively break even in buying power terms and that's not counting being hit by taxes on the gain that wouldn't buy more. The real danger of deflation comes when people stop spending thinking it is better to buy later because things will get cheaper. Along with problems getting funds, that's the killer with home buying. If people think there's continued deflation in housing, they'll try to hold off buying. Of course behavior has to be adjusted for other factors too. Deflation from things like falling oil prices is good. Many consumers will buy more of other products if their energy costs fall. It would help others pay down debt. That's good, we don't want them to default. Of course those in the oil industry want things to fall just enough to kill/delay alternatives or improvements in efficiency. It's good if we reduce the percentage of our spending on imports if those prices fall, but bad if exchange rate shifts reduce demand for our exports. Deflation won't be flat across the board by wages, products, or region so analysis is very complex. Income is another issue. Considering that most worked-for incomes haven't kept pace with inflation for some time now, our value to the workforce has deflated. Deflation is bad in the sense of allowing those out of the country holding dollars to buy up more assets like real estate. We want people abroad buying our products and services, not our land. Not owning our land effectively makes us slaves.