[RockyMcNuts]

tell it to the guy who goes from an 80% loan-to-value on his house to owing way more than the house is worth.

who's going to build a factory if building the factory is going to be significantly cheaper next year, not to mention everything it produces?

who's going to hire anyone if you can hire them cheaper next year?

especially in a country like the US, where everyone is in debt up to their eyeballs, deflation is a disaster.

[juliancorlet]

"who's going to build a factory if building the factory is going to be significantly cheaper next year, not to mention everything it produces?"

That statement is true of just about any technology I can think of, and yet investment in tech doesn't seem to have collapsed as a result.

[RockyMcNuts]

good point. but tech progress is fast, and tech margins for the leader are gigantic. so you recoup your investment in 3 years before the next generation. then the next generation is 10x better, so that motivates building the following factory with high margins.

you can't build a new power plant that makes 10x better power than the last one. and yet prices are falling. so basically you have to wait a lot longer until the old plant is obsolescent, or only build a power plant when the power shortage gets really bad and margins so high that you would recoup quickly.

falling prices mean high real interest rates, fewer projects meet high hurdle rates, less investment, less growth and employment.