Simplistically, the problem with overall deflation in the economy is it means that a dollar today is worth more tomorrow, thereby incenting everybody to hold onto their dollars money.
Everything you write is true. However, there is a second problem with deflation, and there's massive empirical evidence from history showing that it's an even larger problem.
Debt is denominated in nominal dollars. Deflation makes it *harder to pay off debt* while simultaneously making the value of bonds held by rich people higher. Since the poor are generally in debt and the rich generally own debt, deflation directly and immediately makes the poor poorer and the rich richer.
Debt deflation can, and frequently does, run ahead of wages. It can leave poor people in a position where they can NEVER pay off their debt even with a steady job.
Historically, the next step was for the rich lender to "offer" to replace the poor person's debt with a promise of indefinite servitude by the poor person -- *serfdom*. This is actually how feudal serfdom arose in a number of places in the early Dark Ages. We are seeing similar stuff happening now, just the beginnings of it. Rich corporations are taking students who are deep in student debt and offering to pay it off in exchange for the student signing their life away to the corporation, basically. This is the end of capitalism and the beginning of feudalism -- the *actual* road to serfdom.
Now, most debt deflation doesn't actually go THAT far. Because, during the Enlightenment, we outlawed a bunch of these serfdom contracts. So the 19th century result of deflation was simply that very poor people were constantly turning their money over to lenders. While the rich got richer.
Eventually, it gets bad enough that the poor people start defaulting on the loans. Then it hurts the pocketbooks of the rich people too, but it still hurts the poor worse. In the 19th century in the US, whenever this happened, Congress would pass a special bankruptcy law making it really easy for poor people to declare bankruptcy, write off their debt, and start with a clean slate.
By contrast, in the 2000s, our corrupt Republican Congress passed the "bankruptcy bill" which prevented most people with incomes from declaring bankruptcy and getting a clean slate. Now you can have a substantial income and still be dirt poor (in terms of living standards) for the rest of your life as you owe your income to lenders, forever. Supporters of feudalism love this. Of course, student loans are the worst because they can never be discharged except by death.
