> The government is selling Treasury securities on the open market.
Right, which the Fed is then buying with the money being printed. Government debt is being monetized by the Fed however you slice it.
> Deflation is a bad thing for borrowers.
I understand what you're saying, and in theory, it's true. Practically, it's flawed. Why? Because when I'm on a fixed income, I don't care about the value of my money that's going toward paying down debts. I care about the value of the money I have left over.
Say I earn $1000 a month. $600 goes to loans. $400 is left over to spend on food. With deflation, sure, that $600 is really worth more than otherwise. But it's a sunk cost to me. That $400 is what matters to me, as a consumer, and with deflation, it buys me more food!
You assume those other numbers a constant with deflation, but they aren't. Because deflation means that $1,000 buts your employer more hours of your labor just as much as it means $400 buys you more food. Double the value of money and, sure, $400 would buy you what used to be $800 of food. But $500 will buy your employer w the equivalent of what used to be $1,000 of your labor (from someone, if not from you), so instead of $400 left after the fixed cost of financing those loans, you'll have a $100 shortfall.
Right, which the Fed is then buying with the money being printed. Government debt is being monetized by the Fed however you slice it.
> Deflation is a bad thing for borrowers.
I understand what you're saying, and in theory, it's true. Practically, it's flawed. Why? Because when I'm on a fixed income, I don't care about the value of my money that's going toward paying down debts. I care about the value of the money I have left over.
Say I earn $1000 a month. $600 goes to loans. $400 is left over to spend on food. With deflation, sure, that $600 is really worth more than otherwise. But it's a sunk cost to me. That $400 is what matters to me, as a consumer, and with deflation, it buys me more food!