This would be great for the environment, but absolutely terrible for the economy
Sometimes I think about this as promoting investment in cash. Deflation over time means cash yields a profit.
But since cash doesn't actually do anything, investing in cash instead of something else is harmful.
One implication of both of our comments is that unanticipated deflation is good. What causes problems is the reaction people take to anticipating that deflation will occur -- they wait it out -- not the fact that things are cheaper.
The necessary refinement would be that unanticipated deflation that comes from an increase in the amount of stuff is good, and unanticipated deflation that comes from a reduction in the amount of money is [?].
Introducing that dimension asks us to fill out the grid:
- anticipated deflation from an increase in the amount of stuff: [?]
- anticipated deflation from a reduction in the amount of money: bad
In these discussions it's easy to forget that it's not only things that get cheaper or more expensive. Services and people's salaries also adjust the same way. With deflation your salary will also go down.
But in either case, the problems associated with deflation come from the actions people take to prepare for it, not from the consequences of it having already happened.