The word “deflation” covers several distinct phenomena. Here, when we speak of “harmful” deflation, we mean a sharp contraction of the money supply during the transition from boom to crisis. In its simplest form, withdrawal of the primary deposit causes the money supply that the bank had “wound up” on that deposit to “collapse”—the multiplier works in reverse as well. This always happens, in any crisis. Everything we wrote about inflation applies to this phenomenon as well: by driving price changes (usually downward), such deflation strikes hard at the coordination between economic actors, leading to errors.