>because of the 2% deflation those widgets are worth 2% less every year. Also, the value of your loan increases in real terms, as does the labour-share of inpu

>because of the 2% deflation those widgets are worth 2% less every year. Also, the value of your loan increases in real terms, as does the labour-share of input costs (because the workers aren't going to give back wage gains in times of deflation). Your return is hampered. These are some of the problems with deflation.