Since unemployment would remain high for longer, people would lose their skills; and as investment would remain subdued for longer, the productive capacity of the economy would suffer lasting damage. A crisis-induced loss of output would then become permanent, and the real wealth of savers would inevitably be lower.
In a world where the Reserve Bank was undertaking no open market operations, the amount of cash that underpins the money market (exchange settlement funds, or what the academics call "highpowered money") would depend on the Government’s fiscal balance, and it is not hard to see that this would be likely to result in monetary instability.