Put simply, inflation is when prices rise. The result is that money loses its value. Deflation is when prices go down and money increases its relative value. Financial historian Amity Shales summarises the issues Deflation ... hurts good people, strivers who over-borrow. {It} can cause depressions, as the U.S. saw in the early 1930s ... In the Great Depression, there wasn’t enough money around -- literally. Lacking cash, banks collapsed, and good people did lose homes or farms. More banks collapsed. { But }..... Deflation doesn’t always spell apocalypse. It can coexist with prosperity -- or even perpetuate it. There was deflation in the 1920s. Prices fell in 1923, and 1925 through 1928. The money shortage hit one sector, farming, hard. Overall, the economy grew. Unemployment stayed low. Vigilance on inflation kept prices stable. Stable prices made life easier. For example Harvard’s tuition stood at the same level, $150, between 1870 and the beginning of World War II.