If you're familiar with the computer hardware market, you know exactly what I mean. Ultimately, I think this is very consistent with the philosophy of the market, however. Cash under your mattress suddenly has an effective interest rate equal to the rate of deflation. This means the reward for foregoing immediate consumption, an integral part of the capitalist equation, is an intrinsic part of the market process. It also means deflationary pressure stimulates investment and saving by adding an extra rate of return equal to the deflation rate.
More investment then begets faster long-term growth which begets even higher deflation rates.
Greater real wages may causes workers to consume more not less. If you're familiar with the computer hardware market, you know exactly what I mean. Cash under your mattress suddenly has an effective interest rate equal to the rate of deflation. This means the reward for foregoing immediate consumption, an integral part of the capitalist equation, is an intrinsic part of the market process. It also means deflationary pressure stimulates investment and saving by adding an extra rate of return equal to the deflation rate.