What are the benefits of deflation?
Deflation is a terrible, terrible, terrible thing. While a very small group of people, mostly lenders, gain from deflation, deflation tends to destroy economies. Prices fall because aggregate demand drops, i.e. consumers, for some reason or another, cannot afford to maintain their current levels of consumption. Prices fall and interest rates rise, making it difficult/impossible for producers to meet their costs. They cut production and fire workers, leading to a further decrease in aggregate demand, causing a downward spiral, if you will. Essentially deflation destroys welfare/wealth, seriously hurting economies.
