>Deflation increases the value of my debt load putting me in deeper and deeper and reduces the value of my assets; how is that good? Deflation increases the value of saved cash. If anything, that sounds way worse for the poor than slight inflation. If I'm rich I just keep all my wealth in cash and steal from the poor via deflation.

The value of your assets is untouched, the value of your assets relative to money goes down. There's nothing wrong with that. Who told you to go into debt in the first place? Islamic Finance, for example, doesn't allow for interest bearing fractional reserve debt, and Indonesia largely rode out the most recent economic crisis? I think with modest deflation, borrowing will not cease, but will largely be confined to collateral-backed loans (like car and home loans) and investment loans (like a loan to start out a second restaurant where the first succeeded). Revolving debt will disappear, and I don't really have much of a problem with that.

I'm also unclear as to how deflation steals from the poor. If I am rich, and spending 20% of my income on day to day expenses, and there's 10% deflation, I will be spending 18% of my funds on day to day. That's a 2.5% increase in discretionary spending/investing power (80%-82%). If I'm poor, and spending 90% of my income on day-to-day expenses and there's 10% deflation, I will then be spending 81% of my income on day to day expenses. That is a 90% increase in my discretionary spending/investing power (10%-19%). Sounds to me like a good deal for the poor.

> Under continual inflation, I can't do that, I have to convert my wealth into hopefully appreciating assets-and I could easily bet wrong-and the poor have continually decreasing debt as long salaries keep up with inflation. Sounds like a better deal to me.

1) any situation where you feel like "have" to do something is generally a red flag, if you ask me.

2) Who told the poor to go into debt in the first place? Under continual inflation, you encourage financiers to seek out more and more predatory loans (so they can make money off of the delta-interest and exert the strong arm of the law against the poor to wring the last of their money out). In a deflationary environment, instead of having to borrow money, from ever more-centralized banks, and when people get in trouble you will see them seek help from decentralized, local, institutions, like families, churches, charities, and mutual aid societies. This naturally limits the spread of risk. In a debt-based society, a catastrophe (like say, katrina, or say a meteor hits NYC) ripples throughout the debt network, as the victims are unable to repay their immediate lenders, whose power to pay back their lenders also gets hurt, and so on like dominoes. In a savings based society, the damage done by a catastrophe is largely a sunk cost.

3) I went over the mathematics of how the endebted poor are not helped by inflation many, many, posts up. The gist of it is the erosion of amortization power far far outstrips any benefit gained from loss of real debt value... And the reason for it is:

>as long salaries keep up with inflation

They don't.

>You assert that, but I don't see any proof or evidence of it.

Well, the two mechanisms of inflation are printing money (which sends money to the politically connected) and debt expansion (by lowering fed rates or by loosening reserve requirements) which sends money to the financiers, or rich people.

That's my point. It's not the naturalness of deflation that makes it good, but the fact that inflation is a policy choice with bad results that makes inflation bad. It is possible to have natural, secular inflation, if population expands faster than technology can accomodate feeding mouths and housing the new people - and I'm more neutral on that situation.

But a side effect of secular, natural, deflation is that we live in a savings-based society, which is more stable. I consider this to be good. There will also be a natural redistribution of wealth to the poor. I consider this to be fine. Artificial deflation can be catastrophic, and even kleptocratic, as happened just prior to the great depression as well as in argentina during the 70s.

If you can't see why deflation is 'natural' consider any technology where government has not instituted price controls. You would be hard pressed to argue that there hasn't been "price deflation" - a phrase I cringe to use because it's a malignment of the concept - in computers, TVs, cars, voluntary medical procedures like lasik or breast implantation...