Journal of Business & Economic Policy

ISSN 2375-0766 (Print), 2375-0774 (Online) DOI: 10.30845/jbep

Should We Fear Deflation? An Economic Analysis
Jordi Franch Parella

This paper analyzes the current monetary problems, associated with the fiduciary currency and expansionary monetary policy. And it suggests a possible solution in which the return to sound money and deflation plays an important role. The paper discusses the nature of fiat money in the current system, highlighting the dangers involved in the present worldwide monetary policy. It claims that we should reconsider the qualities of a monetary and financial system based on a commodity money that establishes natural limits to the expansionary policies. The paper also systematizes the different sorts of deflation. It analyzes and debunks the main arguments against deflation and concludes that the alternative is a return to sound money, the spontaneous creation of the social order, and a rejection of the meddling of central banks.

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