This is true, and I disagree with Klugman. However, I can understand the thought process of inflation being good with regard to the housing market. If inflation were to increase, the under water mortgages get turned right side up in a shorter period of time, ultimately creating "equity". Whether solving the housing/mortgage issues result in a benefit to the economy is a whole other discussion.
The problem with the underwater mortgages et al is no amount of fiddling with numbers will create actual VALUE in that market (short of natural growth). You can shove value around, and force some people to eat their losses (which is probably the fastest way to fix the problem, albeit the cruelest), but not until real demand catches up with real supply will the real value of homes rise to refill the equity shortfall.
Increasing inflation just moves the market’s lack of value from homeowners to banks. The problem remains, and the consequences are merely rearranged. To wit: if I borrow $100K from you, and before repayment the dollar is devalued 90%, the $100K I give back to you amounts to $10K pre-inflation buying value - a deal you would _never_ have agreed to if you knew about the coming inflation.
(at this point I’m pretty much just thinking out loud)
Properly handled, inflation balances the value of currency units against growth of wealth & population. The goal is to keep a dollar worth “a dollar” despite population & GDP doubling, and the _appearance_ of inflation is 0%. A slightly positive inflation rate encourages people to keep that money moving, preferring to acquire goods/services rather than sit on zero-velocity “mattress savings”. Negative inflation, deflation, discourages economic activity because the currency increases in relative value by just holding onto it. Seriously positive inflation cheats lenders: as inflation rate increases above existing loan rates, lenders lose money (that includes you investing in CDs, bonds, or other fixed long-term holdings) ... and that’s what you’re proposing to do by increasing inflation to “help” mortgage borrowers - helping them by cheating the lenders by devaluing what is owed.