[quote=patientrenter]Why isn’t deflation or inflation a choice that government can make at will, through the magic of the many money creation tools at the government’s disposal?

Am I missing something here?[/quote]

You are missing that our currency is based on debt and all the ‘inflation’ of the past decade was via borrowed money.

So those inflated assets have to deflate as they are either sold of or defaulted on to service the same debt that was used to purchase them with. Or the debt itself is defaulted on and the banks get stingy and refuse to lend out money for further inflation.

The Fed is pushing on a string. They can print new money but they can’t force what lenders/borrowers do with it. And apparently the lenders are just buying treasuries (which should surprise no one).

It boggles my mind that this is so hard for people to understand. Debt deflation is the natural result of a credit bubble. It is unavoidable.

Japan is different in a very fundamental way as they tend to honor their debts more. There are many Japanese that are servicing mortgages for properties that are only worth a fraction of what they paid for them. Its part of their culture.

That won’t happen here so the correction should be much swifter. Look at the recent news that over 50% of loan mods fail. Of course they do, as you can’t force someone to pay more for an asset than what its worth if they don’t have to. They will just walk away.

The only alternative to this is hyperinflation, where the government just gives people cash right from the printing press. Thank God this hasn’t happened yet, but who know what the future may bring.