Deflation Means Pay Raises, 'Strong Leg Up': Market Pro

Need a pay raise? Try deflation.

American employees may have trouble getting a raise these days, but deflation may work in their favor, Jim Rickards, senior managing director for market intelligence at Omnis, a consulting firm, told CNBC Monday.

"Deflation is a very positive thing," he said.

"Let's say you make $40,000 and you go to your boss and say 'Give me a raise,' and the boss says, 'Are you crazy? You're lucky I don't fire you; go back to your desk.' But if the price level drops 10 percent, he just had a 10 percent increase in his real standard of living."

While the government taxes employee income, it hasn't yet figured out how to tax deflation-adjusted earnings, he pointed out.

And even though deflation increases the real burden of debt, resulting in more people defaulting, and ultimately, more banks failing, he said, it would benefit the economy long-term.

"Let these banks fail; new banks will start overnight and get this economy going again," he said. "People who talk about the V [shaped recovery] don't have the courage of their convictions—you're not going to get that strong leg up unless you test the bottom. Part of that is deflation."