# Why Deflation Is Actually Worse Than Inflation

Sound counterintuitive? Here's the thing: when prices drop across the economy, people assume it's good news. But it's the opposite of what you want.

**The core problem:** If prices are falling, you'd rather wait to buy things tomorrow than spend today, right? That's exactly what everyone thinks. Result? Spending crashes → company revenue drops → layoffs spike → unemployment soars → people spend even less → prices fall harder. It's a vicious cycle called "deflationary spiral."

**Why it's worse than inflation:** With inflation, debt becomes cheaper (your mortgage gets easier to pay). With deflation, debt explodes in real value—if you borrowed $100k at 4% and prices drop 3%, you're actually paying way more. Nobody wants to borrow, nobody wants to invest. Cash sits in the bank earning nothing.

**Historical damage:** The Great Depression saw a 33% price collapse between 1929-1933, unemployment hit 20%+. Japan has been stuck in mild deflation since 1998—basically two decades of slow growth.

**The fix:** Central banks pump money into the system, slash interest rates, and boost government spending to force people to spend and borrow again.

Bottom line: Deflation is an economic death spiral. Governments will do almost anything to avoid it.