Effects of deflation
As the prices of and demand for consumer goods and services drop, other demand starts to drop -- for instance, the demand of investors for investments. This pushes prices down even further for all kinds of assets, including stocks, bonds, real estate, and even futures contracts.
If deflation continues for very long, the bottom lines of a widespread group of companies will start to suffer, which can then cause companies to spend less money on production costs, including workers' wages and the upkeep of facilities. Jobs are lost -- sometimes in very large numbers, creating significant unemployment -- and factories are shuttered.
Under these conditions, people don't spend their money on things they don't absolutely need because they have no idea what their future looks like. A glut of savings may mean lower interest rates on savings accounts, which can drop to close to zero since banks won't be making as many loans and won't be able to pay as much interest.
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