Very good deflation article

Inflating Away Debt by Mish
http://globaleconomicanalysis.blogspot.com/2008/02/inflating-away-debt.html

Very interesting article. This does not mean I agree with it, but surely is conviencing.

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Suppose you want to spend more money this month than your income. This situation is called a "budget deficit". So you borrow. The amount you borrowed (and now owe) is called your debt. You have to pay interest on your debt. If next month you don't have enough money to cover your spending (another deficit), you must borrow some more, and you'll still have to pay the interest on the loan. If you have a deficit every month, you keep borrowing and your debt grows. Soon the interest payment on your loan is bigger than any other item in your budget. Eventually, all you can do is pay the interest payment, and you don't have any money left over for anything else. This situation is known as bankruptcy.

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Why The Fed Cannot Inflate Consumer Debt Away?

• The Fed cannot put dollars in everyone's pocket.
• The Fed cannot create jobs.
• The Fed cannot force consumers with no money to buy houses to drive prices back up.
• The Fed cannot change consumer attitudes towards debt and spending.
• The Fed cannot force businesses to go on hiring sprees.
• The Fed cannot force wages to rise.
• The Fed cannot do anything about global wage arbitrage.