[Glossary](https://pecuvo.eu/en/glossary/) · Money and currencies # Deflation **In short:** Deflation is a general, lasting fall in prices: money buys more, but debts become heavier and people put off buying. **Simply put:** It sounds good — everything gets cheaper. But if people expect things to be cheaper tomorrow, they delay purchases; businesses sell less, and wages and jobs fall too. A debt stays the same number while incomes shrink. Under the gold standard, deflations and bank panics were frequent. That is why the ECB sees inflation below 2% as just as unwelcome as inflation above it. **Example:** You have a €10,000 loan and a €1,000 salary. If prices and wages fall by 10%, your salary becomes €900 while the debt stays €10,000 — it now weighs more. **Watch out:** Myth: "Falling prices are always good news." In a deflation creditors and holders of money gain, while debtors and job seekers lose. **Source:** Federal Reserve History, "The Great Depression" — https://www.federalreservehistory.org/essays/great-depression · ECB, monetary policy strategy — https://www.ecb.europa.eu/mopo/strategy/html/index.en.html ## In depth in the modules - [Module 1](https://pecuvo.eu/en/modules/history-of-money/) - [Module 2](https://pecuvo.eu/en/modules/currencies-and-backing/) - [Module 4](https://pecuvo.eu/en/modules/the-mechanics-of-money/) ## Related terms - [Inflation](https://pecuvo.eu/en/glossary/inflation/) - [Gold standard](https://pecuvo.eu/en/glossary/gold-standard/) - [Purchasing power](https://pecuvo.eu/en/glossary/purchasing-power/) - [Debt](https://pecuvo.eu/en/glossary/debt/) - [European Central Bank (ECB)](https://pecuvo.eu/en/glossary/ecb/)