You guys are missing the point.
This is not about AH prices.
It's about the fact that WoW itself generates gold: Gray trash items, quest rewards vendored for gold, and gold rewards from quests.
This is a constant influx of gold into the server. And then that gold gets redistributed when people buy/sell items. The end result is a bunch of fat cats with huge stashes of gold.
Then, the fat cats decide to buy/sell even pricier items, for even more bloated prices, since they know that other fat cats will can afford to buy them.
This leads to the gradual collapse of the whole economy. First year, a server may have 1 million gold in circulation. And then 3 million, 5 million etc.
By cutting all gold, the actual gold coins, the servers are reset back to pre-inflation values.
Yes, it sucks for those who have stockpiled tens of thousands of gold... but so what. It's necessary unless we want servers with 100 million gold coins in circulation, where every basic item costs 100g each, and where new players can't afford anything. -- Exactly like Retail WoW is now after years of inflation/gold piling up.