Your argument may have merit, but it oversimplifies an important point (in my opinion) If money is "hidden under blankets" it is taken out of circulation. The

Your argument may have merit, but it oversimplifies an important point (in my opinion) If money is "hidden under blankets" it is taken out of circulation. The value per unit currency still in circulation increases (due to lack of supply) and this will boost the purchasing power of the money remaining in circulation. For this reason the idea that "deflation causes a liquidity crisis" is a bit misleading- It causes a liquidity crises measured in "face value" but not in "purchasing power" of the currency. (Though some of your prognoses are probably still true but occur because of other, somewhat different mechanisms)