Deflation is only a scary thing because people have adapted to inflation, and that has shaped the last 100 years or so of financial history in this country. It

Deflation is only a scary thing because people have adapted to inflation, and that has shaped the last 100 years or so of financial history in this country. It used to be that prices went up, then down, then back up again, then back down again, etc on a time-scale of a couple of years. Maybe spanning a range of 4x or so. Because everyone knew that's how things went, they arranged their affairs to cope and things weren't amazing, but a year or two of deflation didn't destroy the world. What we have now are huge asset bubbles that are popping and people at the Fed are trying to reflate and/or at least slow the collapse down. The problem isn't that deflation might happen; it's that there were years and years of asset prices going to more and more unreasonable levels that no sane person would pay. How do you clean the slate and get asset prices back to levels that might make sense from a fundamentals perspective instead of a risk-on, risk-off perspective? The only thing I can think of is to let them fall to levels where people would be willing to buy them again. It's either that or a 20 year inflationary slog to slowly reprice them in real terms. In other words, at 4% inflation over 20 years if a price doesn't change in nominal terms it'll lose 55% of its value in real terms. That roughly approximates it dropping in value 50% in say 6 months nominally, because in 6 months nominal terms are unlikely to diverge from real terms by more than a few percent. Which would you rather have? 20 year of Japan or the Great Depression, or a fairly swift realignment of the economy to the new realities? Either way the assets have to get repriced once everyone realized that they were priced horribly, horribly incorrectly.