[jarsin]

You're missing the debt equation. We live in debt based economy. True across the board deflation (not just some things get cheaper cause of tech etc) means debt is harder and harder to service as wages and earnings fall. As the asset backing the debt goes underwater the debt holders have no choice but to walk away. All banks stop lending and ultimately the entire economy grinds to a halt. That's the main cause of the spiral.

One man's debt is another mans income.

The reason we narrowly avoided full blown deflation in 2008 is because they bailed out the banks. If they didn't we would have had 1929 style depression these last 15 years.