I an article I linked to yesterday, George Reisman explained how falling prices, far from being deflation, are actually the antidote to deflation. They are the antidote, he explained,
because they enable the reduced amount of spending that deflation entails to buy as much as did the previously larger amount of spending that took place in the economic system prior to the deflation.
Despite the fact that the freedom of prices and wages to fall is the simple and obvious way to achieve economic recovery, two fundamental obstacles stand in the way. One is the exploitation theory of Karl Marx. The other is the doctrine of unemployment equilibrium, which was propounded by Lord Keynes.
Both bad ideas have been embraced by the world’s politicians and economic advisors. Read on here to see both briefly explained, and resources offered to have them thoroughly debunked: The Fundamental Obstacles to Economic Recovery: Marxism and Keynesianism.
UPDATE: “Keynesians are witchdoctors,” says Peter Schiff.