>>>This is what I was pointing out as my disagreement. Right now the US is purposely devaluing our currency. The resulting inflation may be good for the US debt load but any gain to the country's financial situation is offset by the real costs inflicted on the citizenry through increased costs of goods & services on a day-to-day basis.
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>That's only true if pay doesn't keep up with the CPI. Is that your expectation, because this has caused rioting by the desperate poor when it occurred elsewhere.

From what I've read, salaries are not keeping up with inflation. A significant portion of non-salary "income" is in the form of government largesse, be it the 1/6 directly receiving checks or the 47% not paying income taxes. We pay for that largesse by "borrowing" from ourselves, be it FED printing or Social Security "lock box" IOUs. This is not sustainable and when the gravy train ends we'll still be staring at inflationary prices and even less "income".

>In any case, inflation also makes your exports cheaper (or more valuable in US$) and incentivizes local production rather than imports.

Agreed, if the US made anything anymore. We're a service economy now, dontchaknow. ;)

>And it stimulates consumption because people whose mortgages effectively are halved will feel as prosperous as the previous generation whose wealth was multiplied by inflation's steady march. Previous good times certainly were accompanied by property inflation: see here http://www.census.gov/const/uspricemon.pdf to calculate that previous generations could sell their homes for ten times the purchase price having enjoyed originally huge mortgages reducing to less than the new owners would spend to repaint the place. People buying their first new home in the 2000s might reasonably expect the same.

I'd remind you that past performance does not guarantee future results.

My estimation is that real estate is going to be stagnant, at best, for 5-10 years. We've had 2 solid waves of foreclosures and a third (which I call the "everybody's doing it" defaults) are starting. The response to the crisis has ended up rewarding those who walked away from their mortgages early and punnished those who've tried to keep up, adjust, etc. Those who kept up are now seeing those who walked away coming back into the market with no significant consequence. The credit hit they took lasted less than 3 years and they scated through with the extra money they didn't pay their mortgages with.

That being said, the rental market is going gangbusters so those who can "invest" in real estate rather than living in it will do well, however, the glut of inventory on the market needs to be cleared before any significant inflationary pricing kicks in. Of course with rates as low as they are those holding 15, 20 25 years should reasonably be able to expect a return comparable to the hitorical norm.