With increasing deflation, the purchasing power of an economic entity increases the more the longer he postpones purchase. Consumers worldwide are interested in that as long as possible to postpone the purchase, and save money over time, only increasing its value. In this situation, companies lose capital, making fewer sales. Lower corporate earnings in the resulting folding corporate programs. The most expensive first article - a candidate for contraction - staff costs. Those. unemployment begins to rise. And then everything is clear.
That's the established theory. This theory is based on the assumption that only growth and a expanding economy are good. If you look at Japan, which is in economic contraction mode since years despite money flooding by its central bank, the life of the ordinary people has not become worse. You have to consider that especially people with low income, who have less options to get attractive returns on their capital, may actually see increases in their relative purchasing power.
What's more: It's highly unlikely that people stop spending entirely in a deflationary setting. They just buy less stuff they don't need and take less loans. In fact, that's a good thing - for people and the environment, because less resources are wasted for artificial growth.
ya.ya.yo!
