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*<If there is major deflation, banks will fail and so will the FDIC, and the government will not be able to bail it out.>

Failure of the FDIC is tantamount to default of the U.S. government. That is truly a doomsday scenario. I don't think it will happen.

The government can print as much money as it needs, to bail out the FDIC and failed banks. The subsequent inflation is a separate issue.*

I'm still unmoved by the assertion that deflation doesn't destroy wealth. There some special circumstances where a minority of the people would benefit from deflation, yes. But, it would be a stretch to say that any wealth had been created. The general wealth of a country would be destroyed by deflationary policies.
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