structural:scholar_edition
Compared with inflation

Deflation causes a transfer of wealth from borrowers and holders of illiquid assets to the benefit of savers and of holders of liquid assets and currency, and because confused price signals cause malinvestment in the form of underinvestment. In this sense, its effects are the opposite of inflation, the effect of which is to transfer wealth from currency holders and lenders (savers) and to borrowers, including governments, and cause overinvestment. Whereas inflation encourages short term consumption and can similarly overstimulate investment in projects that may not be worthwhile in real terms (for example, the dot-com and housing bubbles), deflation reduces investment even when there is a real-world demand not being met. In modern economies, deflation is usually associated with economic depression, as occurred in the Great Depression and the Long Depression. Deflation was present during most economic depressions in US history.