Yet when similar improvements start happening all around, and so affect the general price level, doomsayers start squawking. It is as if they just can't conceive of the possibility of general improvements in efficiency making most people better off, with the gains being transmitted via lower prices. The answer, in three words, is the Great Depression. The early 1930s witnessed a massive decline in prices caused, not by improvements in productivity, but by a collapse of the money supply and consequent drying up of consumer spending. As spending fell, so did earning, and many people found it impossible to pay their debts.
Deflation thus suffers guilt by association, with depression.
People have forgotten all about other eras, like the 1880s, when falling prices were associated with rapid economic growth. Some are even convinced that an economy can thrive only with the help of a continuously rising price level. Well, the Great Depression has been over for more than half a century, and it's high time that people got over their fear of falling prices. As long as those numbers don't shrink, the Fed can rest easy. No matter what the Chicken Littles may say, the Fed should not feel compelled to ease the money supply in response to a mere downturn in the consumer price index.