Around the globe, everything turns on both the GDP and debt of the country. It is very similar to how corporations measure strength, one of those being their borrowing power. A company that says it is worth $10 billion USD is not in fact worth that much, rather it is designed on the fact that they will accrue an amount in their gross revenue that will allow them to pay back the loan over time.

Also, the PTB keep the world under their perverbial thumb by keeping them in debt. As long as the central bank carries notes from the rest of the world, they are able to continue to dictate to those leaders. It is a control mechanism, pure and simple.

Free trade was never meant to be a debtor system. The mechanics were built into it, because it is an imperfect system and those have been exploited by the few to maintain control over the many.

In your scenario, it is much like the Star Trek world, in that there is no debt or income, rather everything is provided to everyone by everyone and everyone serves the greater good for mankind globally. It is not a perfect society, but it removes the burden of debt and allows everyone to prosper from a days labor. Unless I am remembering wrong, those that cannot physically or mentally contribute are still cared for because the society is globalized.

There are as many pitfalls as there are positives in that scenario, since there are still plenty of faulty mechanics built into that type of society for the the power elite to rally and abuse to control the masses.

In your deflation scenario, the fatal flaw is that it would have to be done on a global scale, since every country actually does in fact rely on every other country to survive. Trade is another aspect that keeps countries in debt to one another and regardless of how serene it may sound, there are just too many that will not go along with such a plan.

I applaud the fact that you are thinking about the greater good for mankind at large, it just seems a bit to eutopian for most to swallow.