Deflation and Liberty addresses a critically important issue: the prevailing view that deflation is a catastrophe that must be stopped.
Jörg Guido Hülsmann shows that in fact deflation is nothing to fear. The government should permit it to happen as a path to economic recovery and even use it as a tool for reform. Institutions that are liquidated in deflation need to be liquidated, including banks and other financial institutions.
The essay covers a surprisingly vast theoretical territory in a short space, including the nature of money and interest, the boom and bust, the impossibility of stabilization measures, and the economic trends of the recession. Hülsmann goes further than any previous writer in arguing that no money-creating measures of any kind should be undertaken to cure the bust, even under conditions of falling prices and falling money stock. His rationale ranges from the economic to the political — and is compelling indeed.
Even for those who, in the end, reject Hülsmann's conclusions, his refreshing logic helps the reader break free from prevailing biases and error-filled reasoning in policy culture and mainstream economic thinking.
