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Why Falling Prices Are Actually a Really Bad Thing

Empty shopping mall.

Empty shopping mall.

Photographer: Manuel Gutjahr/Getty /images
Updated on

On the surface, everything getting cheaper sounds like a dream come true. It’s not. The prospect is so terrifying that it’s prompted central bankers around the industrialized world to pour trillions of dollars into their economies to prevent a sustained drop in prices. The European Central Bank followed suit Thursday with a historic pledge to buy government bonds as part of an asset-purchase program worth about 1.1 trillion euros ($1.3 trillion).

Here’s why.