Yes, it would. Dropping prices would provide a disincentive to borrow and an incentive to use current savings for purposes of investment. It means a reward for well-capitalized companies and individuals.
In an inflationary economy, we incentivize debt. In a deflationary economy, we incentivize saving. In an inflationary economy, capital is lost through the inability to properly predict future economic conditions.
Just one last note. A deflation caused by the central bank's tightening credit is damaging. But price deflation caused by a stable money supply is, in my opinion, desirable. Thanks for a good discussion.
Yes, it would. Dropping prices would provide a disincentive to borrow
And industries that depend on a lot of borrowing would suffer. Like manufacturing, farming and housing, for instance.
and an incentive to use current savings for purposes of investment.
Companies that need to borrow to expand typically don't have "current savings".
Just one last note. A deflation caused by the central bank's tightening credit is damaging. But price deflation caused by a stable money supply is, in my opinion, desirable.
Keeping the money supply from growing with output is tightening.