The Economist on deflation

Like many others in recent months, another anonymous economist at The Economist makes the same mistake of confusing 1990s Japan-style deflation with 1930s U.S.-style deflation and, in the process, adds to the growing fear that, somehow, a negative CPI implies that the value of paper money is increasing, causing debtors to hasten repayment of their loans resulting in a dreaded "debt deflation".

Really?

In a world full of pure fiat money, that central banks and governments can borrow and print into existence at will and with virtually no limit, people are really going to think that their money is gaining in purchasing power and change their behavior?

According to this report, apparently so:

A commodity-led fall in inflation ought to be good news for rich economies. It boosts consumers’ real incomes and fattens firms’ profit margins. Yet there is something pernicious about inflation falling too far, too fast. Because falling prices make debt more expensive, indebted households would be more anxious to pay off loans, even as other consumers were benefiting from a boost to their purchasing power. If deflation took hold, the gap in demand left by those fleeing debt would not be filled by cash-rich consumers, who tend to be less free-spending.
A deadly mix of falling prices and high leverage could foment a “debt-deflation” of the type first described by Irving Fisher, an American economist, in 1933. In this schema, debt-laden firms and consumers rush to repay loans as credit dries up. That hurts demand and leads to price cuts. The deflation in turn increases the real cost of debt. It also means that real interest rates can’t be negative, and so are undesirably high. That spurs yet more repayment so that, in Fisher’s words, the “liquidation defeats itself.”

Perhaps a reference more recent than 1933 would have bolstered their case.