> Why would people not invest (or spend for that matter)? People will still invest, but risk tolerance goes way down and ROI expectations go way up. Concretel

> Why would people not invest (or spend for that matter)? People will still invest, but risk tolerance goes way down and ROI expectations go way up. Concretely, your business plan has to compete with "I can get an x% return by putting my money under my pillow", and x becomes very large in a highly deflationary economy. Place yourself in the shoes of a person seeking investment in a productive business, and the problems with a deflationary economy become obvious. Being good isn't enough. You have to be better than "sit on my ass and get rich doing nothing". In other words, the primary concern in a deflationary economy is discouraging value-producing economic activity. Also, all of this is wrt deflation in general. Notice that a fiat currency can easily be deflationary. The deflationary nature of gold standards is a major component of the criticism of gold standards, but there are also other reasons that people oppose gold standards. > Same can also be said about spending. As a contemporary example why would anyone buy a computer today when they know that in the near future they can get a better model for less? The whole computer industry thrives in a price deflationary sector of the economy. People still buy computers because having a computer today helps capture value that you can't capture by having a better computer tomorrow. For consumers, entertainment tonight. For businesses, automating processes today. > Whenever someone is trying to push one economic theory over another the key question you need to ask is cui bono. That's not quite fair. There are people motivated by truth and there are also people motivated by ideology.