Like many I suppose, I've been on a self-directed crash course of study the last few months, learning all about economics. It has been driven by a desire to understand the current economic unraveling -- what has caused it, what hasn't, how it should really be fixed, whether various solutions and fixes will really help or hurt.

Here is one of this morning's headlines in my inbox: "How to Avoid the Horrors of Global Stag-Deflation?"

The author (Nouriel Roubini) believes deflation (a reduction in the amount of money in the world, typically resulting in lower prices) is a horror. That's really strong language. In fact he believes even really low inflation is highly problematic because it's getting too close to the prospect of deflation, "Falling demand will lead to lower inflation as companies cut prices to reduce excess inventory. ... Thus inflation in advanced economies will fall towards the 1% level that leads to concerns about deflation."

So he's opposed to anything less than at least a modest rate of inflation, say 2-3%. If prices actually start to decline, then it's a horror.

I don't understand this. How is inflation (making my money worth less) good and deflation (making my money worth more) bad? If you actually have money, it's somewhat the opposite it would seem.

But, today's world is all about credit. So let's consider this in light of debtors and lenders. If you are a debtor, then inflation is ostensibly useful. You borrow money and pay it back with less valuable money. Of course, the inverse is true for a lender. They lend more valuable money and get back less valuable money in return. This isn't a particularly profitable thing to do generally, so lenders account for this reality by increasing interest rates to cover the inflation. If the interest rate includes inflation, then it's really not doing anything for anyone -- the market has taken care of the problem.

But if it isn't doing anything for anyone, why insist that inflation is necessary and deflation is a horror? Yet, Roubini isn't alone in this assessment. It seems to be widely accepted that inflation is good and deflation is awful. Something else must be amiss.

Any why isn't a stable money supply (neither inflation nor deflation) not desirable over the other alternatives? That would be predictable and, well, stable.

What am I missing here?