You guessed wrong. Parties end. Japan go nailed by demographics in addition to the hangover from a very long debt driven party.
"You really see no dangers to deflating asset prices? What if housing prices dropped 2% a year for 15 years?"
Then at the end of 15 years houses would cost less in nominal terms and [because they are currently beneficiaries of inflation] probably in real terms.
"Would that be good or bad?"
Good for new buyers if houses deflated in real terms. Bad for existing owners although they should never really have expected their house to be an investment ... and whatever amount they realized from the sale in nominal dollar terms would be worth more in real terms.
"Would deflating prices for automobiles make GM more or less likely to survive?"
The flippant answer is it makes no difference [near zero chance either way without some sort of recapitalization / bankruptcy / renegotiation of retiree benefits & union contracts.] GM is where it is because partly because of bad management but mostly because of expediencies years ago that had a lot to do with behaviors facilitated by inflation. Once again, the debt which is more onerous after a deflationary period would be the problem.
" You should refer to Bernanke's remarks (referencing Friedman's remarks) about dropping money from a helicopter."
I noted earlier that Brenake's lame remark wasn't even an original expression of thought. What other point are you trying to make?
"You don't drop money to fight deflation if you've got inflation.
Agreed. I don't advocate this particular act of stupidity under any circumstance.
"Inflation is too much money chasing too few goods. Deflation is too many goods chasing too little money. Too little money can be cured with more money, hence the helicopter."
Too little money? Deflation is not a problem. Too much debt in a deflation is a problem. It is suicidal to advocate an action that would result in a loss of confidence in a currency that has only a measure of confidence going for it. By destroying the underlying confidence in the currency, the helicopter represents the death of the dollar. To advocate the death of the dollar is about as asinine a position as a future Fed chairman could ever make.
So the 70% of Americans who own a house would be hurt, but that's not a problem. Profits would crash. Stocks drop. Unemployment would increase. But that's not a problem. Good to know where you stand.
The flippant answer is it makes no difference
Would any business want to borrow money to expand if prices were declining long term? Would there be more bankruptcies? Business and personal? Would people delay purchases because prices were falling? Would that hurt GDP?
Too little money? Deflation is not a problem.
No it's not. But it was in Japan. And it hurt them. If you think it didn't, you're wrong.
By destroying the underlying confidence in the currency, the helicopter represents the death of the dollar.
You still don't get it. Deflation is bad for the economy. Really bad.
To advocate the death of the dollar is about as asinine a position as a future Fed chairman could ever make.
Do you think Americans during the Great Depression were hurt by deflation? Did it cause more unemployment? Would the economy have done better if the deflation was less severe?