Bernanke, November, 2002 (Four YEARS before Ben was Da Man) - On Deflation.

[Jeff Tumbarello]

(I do believe he's one of those psychic fellers):

Bernanke remarks

EXCELLENT paragraph within:

"Although deflation and the zero bound on nominal interest rates create a significant problem for those seeking to borrow, they impose an even greater burden on households and firms that had accumulated substantial debt before the onset of the deflation. This burden arises because, even if debtors are able to refinance their existing obligations at low nominal interest rates, with prices falling they must still repay the principal in dollars of increasing (perhaps rapidly increasing) real value. When William Jennings Bryan made his famous "cross of gold" speech in his 1896 presidential campaign, he was speaking on behalf of heavily mortgaged farmers whose debt burdens were growing ever larger in real terms, the result of a sustained deflation that followed America's post-Civil-War return to the gold standard.4 The financial distress of debtors can, in turn, increase the fragility of the nation's financial system--for example, by leading to a rapid increase in the share of bank loans that are delinquent or in default. Japan in recent years has certainly faced the problem of "debt-deflation"--the deflation-induced, ever-increasing real value of debts. Closer to home, massive financial problems, including defaults, bankruptcies, and bank failures, were endemic in America's worst encounter with deflation, in the years 1930-33--a period in which (as I mentioned) the U.S. price level fell about 10 percent per year. "

No KIDDING, Ben? REALLY? Now, how could THAT happen HERE, Sir? Prescient comes to mind for some reason. Why, if that were to happen HERE, then Oil, Food, Services and almost EVERYTHING would have fallen since last year..

Oh, but I feel so much better now. If we can just keep the NY Fed and/or Goldman Sachs out of the Treasury, we'll be fine.