Hi DJ, Deflation is actually OK if one is positioned correctly, but financial planning in deflationary environment is not so easy, especially for the leveraged and for the J6P who bought expensive real estates.
The price of food, housing, energy, services and money all decline, thus allowing some folks to get more bang for their dollar, yen and Euro.
The folks who were not positioned correctly, with their high-price purchased housing, large mortgage and low cash level get pretty nervous. Their total asset, represented by stocks, and housing, decline; their mortgage and credit card debt stay constant, even as the service cost on these debt decreases.
For companies, their revenues decline, wage bill stays sticky, and profits collapse, along with their share price.
Banks suffer, because the asset value backing their capital and loan portfolio decrease, and loan portfolio stays constant, or decreases via loan defaults.
Government revenue base decreases, and some may try to boost the tax rate in compensation, squeezing J6P and companies.
Economies contract, because folks buy less, knowing it will be cheaper still later.
The FED is correct in viewing deflation as the greater evil when compared to inflation, until and unless inflation starts taking off:0)
Chugs, Jay
BTW, in case you missed this, it is worth a read, and gives one something to think about over the weekend ...
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