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%?
Only if my savings are held as cash.
Why do you prefer that to relative increase of the cost of your mortgage for the limited time you hold a mortgage?
Increased cost of mortgage in addition to decreased value of the house when I sell it.
Do you think there are no negative effects when inflation results in malinvestment of scarce resources and the boom/bust cycle?
Why would I think that? Do you think that?
Prices will drop for all goods, even those without increasing productivity. Is that a problem?
Certainly not!
So if Boeing doesn't increase productivity and has to reduce prices every year by 3%, that doesn't cost Boeing employees some jobs?
If Boeing defaults on their debts, that doesn't harm their lenders? Those lenders don't reduce their outstanding loans?
The increasing purchasing power of money will mean that more people than ever will be able to afford goods and services.
Absolutely! Except for those people who lost their jobs, or can't get a loan to keep their business going (and their employees) and anyone who supplies those businesses or those unemployed workers.
They deposit that money at Chase Manhattan
JP Morgan deposits the cash at Chase? Okay.
who can then deposit that money with the Fed and make loans on those reserves
Why wouldn't JP Morgan do that, instead of depositing the money at Chase?
Are you familiar with deposit multiplication?
I am aware of the money multiplier. That doesn't make 0% cash more profitable than a 1.87% bond, does it?
Do you think Chase and the others are making consumer loans at <1.87%?
Of course not. What does that have to do with your claim that the first recipients of the new money profit.
I've shown that they don't. Still waiting for your proof that they do.