Deflation's Downside: How Falling Prices Can Spiral Into Economic Decline

Falling prices (deflation) can hurt the economy by discouraging consumer spending as people wait for lower prices, leading to job losses and a deflationary spiral.

Deflation makes loans more expensive in real terms, hurting borrowers.

The main economic risk comes not from falling prices of goods and services but collapsing asset prices that can topple banks.

There are some benefits - falling prices allow paychecks to go further and reduce the cost of living.

The Great Depression saw prices fall 25% alongside a 33% drop in economic output and unemployment rising to 25%, showing the economic damage deflation can cause.