>In practice, experimental evidence tells us that this theory is complete rubbish.
Please, provide us with examples of a sustained deflation that didn't harm the economy.
The supply of money has to grow at the same rate as the real economy, otherwise you can end up with "problems" associated with having "too few dollars". In other words, we need to keep increasing the supply of dollars to buy the growing output of goods we produce. This is common sense. Because it's impossible to hit that growth target exactly, we err on the side of caution and produce some inflation, which has the side benefit of preventing the hording of currency, as it naturally diminishes in value over time. For whatever reason most governments have decided on ~2% to be a safe, stable target.
One of the common misconceptions of deflation is that the lower prices should be good for consumers. Which is true, if terms of consumer goods. But keep in mind that wages and debt are also affected, which is where the real pain from deflation for the average person stems from.
Please, provide us with examples of a sustained deflation that didn't harm the economy.
The supply of money has to grow at the same rate as the real economy, otherwise you can end up with "problems" associated with having "too few dollars". In other words, we need to keep increasing the supply of dollars to buy the growing output of goods we produce. This is common sense. Because it's impossible to hit that growth target exactly, we err on the side of caution and produce some inflation, which has the side benefit of preventing the hording of currency, as it naturally diminishes in value over time. For whatever reason most governments have decided on ~2% to be a safe, stable target.
One of the common misconceptions of deflation is that the lower prices should be good for consumers. Which is true, if terms of consumer goods. But keep in mind that wages and debt are also affected, which is where the real pain from deflation for the average person stems from.