Deflation is bad for the economy as it delays necessary purchases which slows economic growth
why is deflation delaying purchases?
The belief is that if the value of the money rises, people are less inclined to spend it. I feel that the ramifications of this effect are vastly overblown.
yeh, i know this is "the belief". the reason why i was asking for an explanation is, that i somehow dont really agree with that belief.
i think its just a "theory" that justifies the use of inflationary currency
It is not a theory, it is fact that overall deflation hurts the economy that experiences deflation. History has shown that modest amounts of inflation tend to result in higher overall economic growth then the inflation rate. Also the fewer examples of deflation that are available has also had economic negative growth (eg - recession/depression).
Why don't you think of it like this - If you might need to buy a new TV in the near future - you know your current one is going to fail in the near future - are you going to buy one today at current prices, or would you rather wait a few months when the price will be a few dollars more expensive? All else being equal, you will buy it today. If you were in the reverse situation in that the price will decline in a few months then you would delay your purchase which would result in less economic activity in the current month which means the retailer and the tv manufacturer is able to employ less workers (due to lower revenue/profits) which means each of them has less money to spend