I’ve been wondering this question for a while. Ignoring current events, why is a little bit of inflation desirable?
I do understand that it’s done to “stimulate” the economy so people don’t let their cash rot in a checking account, but isn’t it a zero-sum game? Everybody says that money is not meant to stay where it is, rather, should flow through the economy. But if the economy always needs injections of liquidity because otherwise it fails, isn’t the economy broken?
I feel like there’s something I can’t comprehend about that.
Inflation means money tomorrow is worth less than money today. So you are encouraged to spend it.
At a macro-economic level, more money being spent is generally always good as it represents increased productivity (oh, and taxes). So a small amount of inflation is good for an economy.
High inflation means money tomorrow is worth much less which means things start to feel unaffordable.
Wouldn’t making sure that we were secure in the knowledge that we would always have access to the resources we need in the future be a better way to encourage spending since we’d no longer feel pressure to hoard it to guarantee our future security?
Hoarding bad, spending good. Timer on money = more spending.