So you have a mortgage payment that is 100% of your income?
No. And yet, the mortgage remains unchanged while my income drops.
I think I found your problem, like too many Americans, you're over leveraged and want Bernanke to bail you out with his printing press.
No, the problem is the mortgage remains unchanged while my income drops.
For the over leveraged there is a process we call bankruptcy.
No negative effects when deflation causes additional bankruptcies?
But that is precisely the kind of deflation that exists in under a gold standard. As productivity increases the supply of goods grow faster than the stock of gold, prices relative to gold will decrease.
Prices will drop for all goods, even those without increasing productivity. Is that a problem?
Printing money isn't a solution to the misallocation of resources.
No, but it is a solution to deflation.
It only serves to enrich those who first get their hands on it,
Really? Say the Fed buys $1 billion of 10 year Treasuries, yielding 1.87%, from JP Morgan. JP Morgan now has cash yielding 0%. How does this enrich them?
Ok, let's try to put this another way. Inflation reduces your retirement savings every year, for the rest of your life. Why do you prefer that to relative increase of the cost of your mortgage for the limited time you hold a mortgage? Which would you expect, over the course of your life, to actually 'cost' you more?
No negative effects when deflation causes additional bankruptcies?
Do you think there are no negative effects when inflation results in malinvestment of scarce resources and the boom/bust cycle? There is virtue in limiting borrowing for consumption, as it preserves capital for increasing productivity.
Prices will drop for all goods, even those without increasing productivity. Is that a problem?
Certainly not! The increasing purchasing power of money will mean that more people than ever will be able to afford goods and services. Have you ever gone to the store and said, 'Damn! These prices are lower! Now I can buy more, or have money left over after buying the same amount.'? Do you actually see that as a problem?!?
Really? Say the Fed buys $1 billion of 10 year Treasuries, yielding 1.87%, from JP Morgan. JP Morgan now has cash yielding 0%. How does this enrich them?
They deposit that money at Chase Manhattan, who can then deposit that money with the Fed and make loans on those reserves, while JPM still has access to spend $1 billion. Are you familiar with deposit multiplication? This is the process by which the money supply is inflated. Do you think Chase and the others are making consumer loans at <1.87%?