Falling prices are very different from a monetary deflation. Although decreasing prices have some degree of inflexibility, we must reject âdeflation as dangerâ (FED best selling story). Attached is a description about the differences in falling prices due to free market, vs. deflation caused by a reduction in the money supply. YOU BE THE JUDGE!! FALLING PRICES INCREASES IN PRODUCTION AND SUPPLY 1. No wiping out of business profitability, since nothing is present to reduce aggregate business sales revenue. Indeed, a modest increase in aggregate sales revenue and profit to the extend that the increases in production and supply includes an increase in the production and supply of commodity money, which results in rising aggregate spending. 2. No greater difficulty of repaying debt, but greater ease, to the extent of the increase in the quantity of money and volume of spending. (In other words a very elastic market demand created by real production) 3. A rise in the real incomes of virtually all members of the economic system, who can take advantage of the lower prices with the same aggregate money incomes: or who can take advantage of a lesser decline in prices accompanied by greater aggregate money incomes. FALLING PRICES MONETARY CONTRACTION 1. Wiping out of business profitability due to immediate decline in sales revenues in the face of costs that fall only with a more or less significant time lag. 2. Greater difficulty of repy8ing debt including widespread insolvencies and bankruptcies. 3. Mass unemployment until such time as wage rates and prices fall, to correspond to the reduced quantity of money and volume of spending for goods and labor.