inflation vs. deflation: I have three points for your consideration 1) High tech sector has been experiencing massive deflation for decades and is thriving.

inflation vs. deflation: I have three points for your consideration 1) High tech sector has been experiencing massive deflation for decades and is thriving. Why? Is deflation really that bad when it comes from productivity? We know deflation due to massive decrease in money supply or velocity is bad, but what is wrong with slow, steady deflation from productivity? 2) With 2-3% steady deflation, won't interest rates adjust? People will lend their money out to earn a better risk adjusted rate than deflation. There isn't some magical number or percentage where people will start or stop lending. It's more like behavioral economics where people have several choices at different risk profiles. 3) The biggest proponent for an inflationary system is the banking system and economists who are funded/trained/selected by the banking system. This casts a lot of doubt on 'inflation is bad for lenders' statement. In a deflationary system, productivity gains go to the consumers (via lower prices). In an inflationary system, productivity gains go to capital owners (via debt and higher prices). The US experienced very strong but volatile economic growth under a capitalistic fixed currency system (gold standard) that had periods of deflation and inflation in the 19th century. There is no historical basis that shows that capitalism needs inflation.