[BfloGuy]

I believe the Great Depression is considered to be the poster child of an economy wrecked by deflation.

It may be considered the poster child, but it wasn't. The prices of goods did fall because of the contraction in the money supply, but Hoover and FDR forced wages to remain high -- that was the cause for the disaster. Business saw profits squeezed to the point of bankruptcy.

If prices and wages are both allowed to fall together, the net result is that nothing has changed. Profits don't fall because the cost of production goods (and labor) have fallen, too. The author is correct -- deflation without government interference is not harmful.

[ClearCase_guy]

Perhaps it is true that the harm caused by deflation in the 1930's could have been avoided, if the government had not interfered.

But that's almost a semantic argument. There was government interference. There was deflation. There was harm.

When I say that the economy of the1930's was damaged by deflation, I believe I'm stating a simple fact. The additional fact that the harm could have been mitigated by a more laissez-faire govenment is also true. I would say that you and I are both correct.