For this to happen prices would have to rise high enough to cover the costs of production, meaning costs would have to fall relative to the monetary value of the output. But this means that the current malinvestments aree only being temporarily rescued while new ones are being simultaneously created thus making the next depression even deeper. The main aim of this inflationary package is to stimulate consumption. But Austrian analysis reveals that a policy of stimulating consumption is incompatible with rescuing malinvestments. In fact, it will only worsen their condition.
Production takes place in stages, with consumption being the lowest stage of production.
Concentrating spending at this stage directs resources from the higher stages, which in turn will raise their costs of production and thus aggravate their financial situation, even endangering companies that would have other wise survived the crisis. Eventually the government would be forced to apply the monetary breaks, sending the economy into another depression. The lesson from the American 1920 crisis is that Governments should do nothing. Depressions are actually recovery processes during which maladjustments are purged from the economy. They are, in a sense, withdrawal symptoms.