But deflation and inflation don't work like that. It's not a sudden drop or a sudden rise after which we magically reset. It's a process. Another way of sayin

But deflation and inflation don't work like that. It's not a sudden drop or a sudden rise after which we magically reset. It's a process. Another way of saying that is that what matters is not the price right now or the price yesterday but the price expectations and the feedback loop. There's lot of questions to ask about your $5.15 sample there. Were there maids out of work? What would have been the cost for those maids to go and clean your house? What's their alternative? In truly tough economical times pretty much any job at any salary was filled. We should be happy we weren't there. As to why people lose their jobs in a deflationary environment I guess it's probably not one single reason but if the economy is doing poorly companies will adjust by reducing their expenses. Whether a single person is laid off because he has nothing to do or 10% of the workforce is laid off because sales are down 10% is pretty much the same thing, no? The point though is that job loss is a more likely outcome then salary reduction, at least I think so, not unlike a recession during an inflationary environment...