In Defense of Deflation

by Philipp Bagus

Mises Institute: What prompted you to write In Defense of Deflation?

Philipp Bagus: One reason is that there was simply no complete treatment of deflation. The other reason is that the fear of deflation has brought disastrous consequences for our economies. This is so because the alleged threat of deflation is used to justify the production of new money. Central bankers argue today that if they do not engage in quantitative easing and other unconventional policies, our economies will slide into a recession and a price deflation. And, implicitly, price deflation is portrayed as something horrible. It is so widely regarded as horrible, in fact, that anti-deflationists do not even think it necessary to prove their claims and analyze the phenomenon systematically. Therefore, I thought it useful to analyze deflation.

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