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.
It’s pretty simple. Borrowed money by the government can be paid back with inflated (less valuable) dollars.
Except in cases where interest rates are near zero so the Govt goes on a massive borrowing binge for over a decade, doesn’t pay any of that debt back, after 10 or 20 years has to roll it over at the now current interest rates moving closer to 6%… Eventually you can’t really just keep borrowing more to pay back old debt, even with a reserve currency where $30 of the $40 trillion is domestic.