What happens when prices fall across an entire economy? In this episode, we explore deflation—a decrease in the general price level where the inflation rate falls below 0%. While cheaper goods might sound beneficial to consumers, we uncover why economists view sudden deflationary shocks as dangerous, potentially leading to a "deflationary spiral" where delayed spending forces businesses to cut production and wages,,. Key topics covered in this episode include: * The Mechanics of Deflation: How an increase in the purchasing power of money can effectively increase the real value of debt, making loans harder to pay off,. * Good vs. Bad Deflation: The difference between "growth deflation" driven by technological progress (like in the late 19th century) versus "credit deflation" caused by bank failures and financial crises,. * Historical Case Studies: A look at the most severe periods of deflation, including the Great Depression in the United States, the "Great Deflation" of 1873–1896, and Japan’s "Lost Decades" beginning in the 1990s,,. * Policy Solutions: How central banks attempt to fight deflation using liquidity injections, quantitative easing, and zero or negative interest rates,. Join us for a deep dive into the history and economics of why falling prices can sometimes be more feared than rising ones.