Dangers of Deflation

If there is one common theme that I hear in justification for the massive government intervention into the economy that we've seen over the past 16 months it is that without the intervention the U.S. economy would experience massive deflation. There is no doubt that deflation not only would be seen in the U.S. economy without intervention but that we are already experiencing it to some degree in spite of the massive intervention. The question isn't whether government intervention was necessary to subdue deflation but rather is deflation the real enemy of the average American?
The cold hard truth is that the danger of deflation lies in the fact that the central bankers of the world lose control of the citizens of the world when deflation enters the room.
The stated goal of the Federal Reserve is "to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates". The Federal Reserve was established in 1913. Since that time the purchasing power of a U.S. dollar has been decreased by 96%. How does that sound for price stability?
Of course if you view your life on this earth as waking up 5 days a week, going to a job you hate, being told when to take a break, when you can relieve your bladder, how long you can take eating your lunch, when you can go on vacation...then this lost purchasing power is not all that meaningful. As long as you are in the workforce your wages are likely to move up near the rate of inflation. In fact many employers allocate a "cost of living" wage increase to their employees to keep up with inflation. So if you're a good little worker bee, while inflation is real, it's direct impact on you is negligible. After all, what difference does it make to you if a loaf of bread is 10% more than it was two years ago as long as you make 10% more than you did two years ago?
One area that inflation does influence the worker bee, whether he/she is conscious of it or not is in it's ability to keep them a perpetual consumer. After all what's the benefit of deferring enjoyment of everything you ever wanted if the dollar you save is going to be worth less in the future than it is today?
In fact, inflation encourages living beyond your means and extending your consumption via the use of all available forms of debt. Why not purchase everything you can with someone else's money? When you finally pay them back you'll be paying them back with dollars that are worth less than those that you borrowed.
Sounds great! So by default deflation would be horrible right? The idea that goods and services would cost you less sounds terrible right? Wait a minute...why would that be bad?
It's bad if you have no money and lots of debt as deflation means that you have to pay back your debt holder with money that is worth more than when you borrowed and that correspondingly you have even less of.
However, what if you didn't purchase everything that you ever wanted? What if you didn't run up debt? What if, heaven forbid, you actually were responsible and saved your hard earned money? Deflation would be a dream come true as your money would actually be worth more than when you began saving it. With the average savings rate among Americans being in negative territory prior to the beginning of this recession you can see how it is an easy sell for the government to claim it was necessary to intervene to stop deflation.
The bigger issue to consider is how inflation is the very tool that keeps the worker bee in the system, under complete control of the powers that be. As long as you are in the system, being told when you can eat your lunch and move your bowels and exactly how long you have to do it, inflation doesn't hurt at all. However, what if you didn't want to be a slave your entire life? If you worked harder, saved more, spent less, and accumulated some money what would keep you from dropping out of the system? One word, inflation.
Inflation demands that either you would have to accumulate more than is reasonable possible or take excessive risks with your money in order just to not see it destroyed by inflation.
Consider that stated goal of the Federal Reserve again of "full employment and price stability". It takes on a new light when you really ponder it. With the dollar losing 96% of it's purchasing power clearly they've been a colossal failure at the mandate of price stability (of course I don't really believe that they've failed in their agenda...only that their agenda is far different than the mandate). However in one respect they've remained successful with their mandate of full employment. We have over 17% unemployment currently so there are clearly lots of people who want/need jobs so they've failed in that sense. However, when they discuss "full employment" their goal truly isn't that everyone who needs a job has one, rather it is the very fact that everyone needs a job because inflation demands that they stay in the system. They have in fact fulfilled their mandate in this regard.
Decide for yourself what's more dangerous, inflation or deflation.