Quote from: Maegfaer on January 26, 2015, 01:36:06 AM

http://object.cato.org/sites/cato.org/files/serials/files/cato-journal/2008/11/cj28n3-1.pdf

"The second type of deflation, however, is the result of positive
aggregate supply shocks that are not accommodated by an easing of
monetary policy. Such aggregate supply shocks are the result of pos-
itive innovations to productivity or factor input growth that lower per
unit costs of production and, in conjunction with competitive market
forces, create downward pressure on output prices. Unlike a collapse
in aggregate demand, positive aggregate supply shocks that are not
monetarily accommodated generate a benign form of deflation
where nominal spending is stable, because the decline in the price
level is accompanied by an increase in the actual and natural level
of output."

Quote from: twiifm on January 25, 2015, 11:47:59 PM

https://www.stlouisfed.org/On-The-Economy/2014/August/The-Gold-Standard-and-Price-Inflation

That article's point is that the gold standard isn't a good idea because it can be abolished or adjusted. Like fiat being "money created out of thin air" a gold-standard is a "promise out of thin air". It basically argues that you can trust neither government nor private central bank with control over your monetary system.

Anyway, I wasn't arguing for a gold-standard.

This is what I said. The price deflation of phones has to do with scale and manufacturing. Still doesn't make this macro. It just makes his original example impotent

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What makes deflation dangerous in our current monetary fiat system has to do with the reason behind the deflation.

No it doesn't because inflation still occurred under gold standard.

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Those in monetary debt are more likely to default in times of deflation, because their debts increase in value. If they default, their creditor (like a bank) has to write off that debt. If the collateral didn't cover the value of the debt, and if the creditor (bank) also has debts to others it might default itself, which may bring it's creditors in trouble as well. It can become a chain-reaction.

Congratulations, you just described a deflationary spiral. In recession all prices are falling including income. Macro 101