I just discovered a decade-old article from WVU professor George Selgin on the positives of deflation from rising productivity.
MYTH … A stable price level serves best to avoid booms and busts. When productivity isn’t changing, a stable price level is indeed consistent with overall stability of consumer spending, business earnings, and profits. But all this changes when productivity is growing. In that case, monetary policy can keep the price level from falling only by artificially boosting consumer spending and industry earnings and, in the short run at least, profits. Although this might not sound so bad, it actually means trouble: high profits are fine when only certain industries experience them and others suffer losses, for then they serve as a useful signal for the reorientation of investment. But high profits all around are the result of unneeded Fed additions to bank reserves, which artificially lower interest rates. That, in turn, leads to overspeculation in asset markets, including real estate and stocks. Then comes a recession, when bad investments are liquidated.
