The Fear of Deflation Is a Decisive Barrier Towards the Installment of a Better Monetary System

I had decided to write on deflation because I regarded the fear of deflation as a decisive barrier towards the installment of a better monetary system. The fear of falling prices has again and again been misused to justify monetary inflation with all its detrimental consequences. Especially, in times of crises the specter of deflation is invoked to inflate the money supply with the aim to prop up failed elites. Indeed, in December 2007 a storm was in the making that a few months later brought the international financial system to the verge of collapse. In autumn 2008 after the default of Lehman Brothers, a deflationary spiral was on its way to wipe away the international banking system and with it highly indebted governments, companies, and individuals. It was a unique opportunity to have a system liquidated that through institutional inflation continually redistributes wealth, generates business cycles, hampers savings and growth, and protects the political and economic elites from competition.

--Philipp Bagus, preface to In Defense of Deflation, Financial and Monetary Policy Studies 41 (Cham, CH: Springer International, 2015), vii.