The progressive blogosphere seems more interested in this issue and the related foreclosure crisis than in my endless rambling about monetary issues. But the two topics are one and the same. Right now, the Federal Reserve appears to be pursuing a policy of “opportunistic disinflation,” allowing the slump to continue in order to permanently reduce the inflation rate to something below its pre-crisis two percent. A more dovish view would insist on monetary expansion until we get back to that two percent rate. A more aggressive course—the one that I would favor—would target the price level rather than the inflation rate and insist on higher than two percent inflation until we catch up to the long-term trend. All three of these courses of action have different implications for underwater homeowners. Monetary expansion tends to make these bad debts diminish and speed the rate at which people can get out from under them. Disinflation, by contrast, makes the debts more burdensome.