Stable money is good, but so is providing people with an incentive to spend and invest, rather than incentives to hoard cash and default on their debts.
True inflation (not the manipulated government statistics) is really a measure of the market. To say that inflation is at the wrong value is to say the market is wrong. The Fed has been striking matches for a while now trying to get inflation to catch on and stand by with the wet blankets when it starts to get out of control. The banks are stuffed full of cash but don't want to lend. If they throw any more fuel onto the fire it might catch and spread faster than they can deal with. Then it's the 1970's all over again and your lifetime savings are decimated in the space of a few years.
People believe that more inflation is needed, then you believe the market is wrong and more intervention by central powers is right. It's ok to believe that, but I'll never agree. High inflation punishes the savers, lenders and investors, and rewards the speculators and borrowers.
I'll admit, my investment strategy is biased towards a breakout of inflation. But that's because I believe the central banks are so wedded to the idea they won't let it go, not because I agree with them. You can't double the money supply in under 2 years without a flow-on effect, even if it's not immediate.
What happened in this crisis is over-investment and over-supply. That waste needs to be rolled back and we need to get back to a balanced budget - which is what Brazil did - it's not even mentioned in that article all the strict fiscal policies Brazil enacted like a balanced budget amendment!!!
The easy money policy causes businesses and people to borrow money they do not have (debt) in false expectation of future profits/income, and they spend money wastefully because they think they have more than they do have.
Now people must save and recapitalize and pay off debt. Some bsinesses must fail. Real estate prices must fall. Public expenditures must be reduced.
People are NOT hoarding cash. Ridiculous. Businesses are saving because look ahead and they know rates will have to increase and the hardships are not over. They are are borrowing at low rates in expectation of higher rates in the future (it would be more expensive to borrow in the future when rates rise)
The numbers disagree with you:
Capital that was malinvested during the boom period has to be accumulated again to return to previous productivity levels. The method to accumulate capital is saving.
What scientists, technocrats and economists forget is that public policy is rarely driven by rationality. It is driven mostly by private interests, demagoguery, blind ideology, prejudice and the public misconceptions.
The idea of taking a little bit of a very dangerous medicine is something that no one should take lightheartedly.
ie. if demand for homes was normal and not stimulated by easy money then there would not have been a housing bubble. a dotcom bubble. etc.
Government stimulated demand is the problem not the solution. (see my other post a few msgs above)
Therefore it isn't as simple as inflation bad, no inflation good. Rather it is too much inflation bad, any deflation bad, and you need to be in the middle. Which means that you want to maintain a small amount of persistent inflation - just enough to avoid the risk of miscalculating and going into deflation, but no more.
A big worry for the USA at the moment is that the current credit issues could lead to deflation.
An inflation rate of between 1% and 3% is generally seen as a sign of a healthy economy (There is sufficient demand for products that some prices can naturally rise, without causing economic disruption. It also implies a low unemployment rate, in that the economy is sufficiently close to full employment to be able to tolerate some price movements)
Some central banks even go so far as to formally announce a inflation target, which gives the markets a more predictable way to forecast interest rates. See http://en.wikipedia.org/wiki/Inflation_targeting
OTOH, hyper-inflation implies a lack of confidence in the currency and economy.
In a lot of ways this is similar to unemployment. Generally, low unemployment is good for the economy (and presumably society) until it reaches a point where businesses are unable to grow because of a lack of labor. When economists talk about "full employment" they usually mean this point - where labor constrains the economy - rather than an actual 0% unemployment rate. (While this sounds quite harsh, there are good reasons why any economy will have an unemployment rate greater than 0%. For example, often the centers of population do not coincide with the places jobs are)