> Deflation in the 1930s happened because the Fed went the other way, refusing to create money. Exactly: In periods like the 1930's, central must lend to banks

> Deflation in the 1930s happened because the Fed went the other way, refusing to create money. Exactly: In periods like the 1930's, central must lend to banks at lower rates and buy fixed-income securities with newly created money as necessary, in order to prevent a deflationary loop. In the 1930's the Fed did the opposite, sending the economy into an even more painful deflationary spiral.