When prices fall hard in the stock market, a trader who holds a short position is obviously on the right side of the trend. But if that stock decline happens during a deflationary crash of the larger economy, a successful trade is not the only way a trader comes out ahead:
"The opportunity to make money on the downside in a deflationary crash can hardly be overstated, because you will be making more dollars as the value of dollars is soaring. It’s a double benefit."
Robert Prechter, Conquer the Crash (2nd ed.), p. 200
Some have argued that it's wrong to "bet against" the market during a rapid decline; when prices were in free-fall in September 2008, the government actually imposed a temporary ban on short selling.
Well, you might be surprised to learn who is largely driving the market down when "fear" is in control. Here's another excerpt from
Conquer the Crash:
"In a bear market, bullish investors always come to believe that short sellers are 'driving the market down,' when in fact, the decline is almost entirely due to selling from within their own over-invested ranks. Sometimes authorities outlaw short selling. In doing so, they remove the one class of investors that must buy. Every short sale (except when stocks go to zero) must be covered, i.e., the stock or derivative contract must be purchased to close the trade. A ban on short selling creates a market with no latent buying power at all, making it even less liquid than it was. Then it can dribble down day after day, unhindered by the buying of nervous shorts. Like all other bans on free exchange, a ban on short selling hurts those whom it is designed to help."
Be aware of two facts: 1) Some brokerage firms may not survive a deflationary depression, and 2) A short position comes with considerable risk.
Yet for traders who can manage that risk, the opportunity will be real indeed at the right time.