... by Nobel price winning economists.
Yeah, like that one who believes in the broken window fallacy:
http://www.youtube.com/watch?v=QG4jhlPLVVsThe Nobel prize has already lost any respect it might had long before giving the peace prize to the guy who just raised the budget of the strongest armed forces on earth.
What prolonged the depression was all government interventions and attempts to recover the economy.
You want to see how can a strong crisis be quickly "solved"? Just read about the 1920 crisis:
http://www.washingtontimes.com/news/2010/mar/18/a-tale-of-two-great-depressions/Some inflation is good. Deflation is bad. Every nation in the world governs by this principle.
And that's why the world will suffer a major economic crisis in less than one generation time.
There is nothing bad about deflation. It rewards savers (and savings is good since it makes capital accumulation easier) and also make it easier for the poorer to consume stuff that otherwise they wouldn't manage to.
Economic exchange today is about a lot more than food. If money keeps increasing in value as long as you hold onto it, you would want to spend as little as possible on other stuff than necessities. You wouldn't even put it in a bank, because banks can go bankrupt. And they will in this scenario, because very few will borrow money if their loan keeps getting higher and higher in money value every year. It also discourages investment. The number of possible investments which gives you more in return than you get by keeping the money gets lower, and this limits economic growth.
First: savers should be rewarded. They make everybody else's life better.
Second: for such a strong price deflation to occur, not only a frozen monetary base is needed, but a strong increase in productivity is necessary as well. Your scenario is self-contradictory. If prices going down causes such bad consequences, how could the prices keep going down in the first place? Productivity would drop and the price of goods would raise since they would become more scarce.
The thing is that prices going down do not cause economic problems. On the contrary, they represent a previous increase in productivity. Prices going down are the result of economic growth.
By the way, the technology industry is a living example of that. Their productivity increases even faster than the central bank printers work. Electronic goods' prices are always falling, and that's not negative at all. That doesn't stop people from wanting to consume them by the way (assuming people would just keep money in their pockets and never use it's quite silly, come on... money is not and end in itself).
Yes! And it makes no sense to spend more money than absolutely necessary if the coin which buys you one bread today can buy three breads tomorrow.
If that happens it means your baker triplicated his productivity in one-day time. Give him a medal or something.
The other way around makes a lot more sense, since that is an initiative to keep the money flowing in exchange for goods, which keep the economy growing.
No, no! That's the source of all your mistakes! It's not money flow that allows the economy to grow, it's not consumption that increases productivity.
Memorize it:
It's not consumption that allow economic growth. It's saving.Repeat it to yourself several times....
Seriously, a raise in consumption is the end consequence of economic growth, not its cause.
First, somebody has to save. Then, this savings can finance capital accumulation. More capital, more productivity. More productivity, more goods and services. More goods and services, more consumption is possible.
Consumption is in the end of the chain. Savings is on the beginning.
Then disprove it. It would certainly earn you a Nobel price.
It already has been disproved since the 20s.
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