Not sure how this exploded into 18 pages but perhaps I should rephrase the question.
What exactly does deflation do in a debt-based money system?
Is it any more different than say a gold standard money system?
Deflation is usually considered a balancing behavior to reach equilibrium in an inflated free market system; so just enough deflation to reach equilibrium is good; too much is obviously bad.
In our current deb-based money system why does Bernanke want housing prices back up? Is it because at the current pricing levels they don't pay back the money that was credited into existence with their construction?
I was curious (after doing an advanced search for 'deflation collapse' with no results) why is the deflationary market pressures so bad for our inflationary debt-based system?
I recall housing prices being very low and Greenspan mentioning that burning the 'extra' houses down from the housing bubble was a swell idea to get the prices back up.
Is the reason deflation is so bad (from a Bernanke point of view) because the value of items decrease making it easier to pay for them; which is bad in our inflationary model since paying off debt is actually akin to "destroying" "money"? But I thought wages go down as well as prices so that confuses me. Any answers would be appreciated. Thanks!