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.

  • Lumisal@lemmy.world
    1·
    5 hours ago

    I’ll assume you genuinely don’t grasp the concept, and not arguing in bad fath.

    I start a business and it becomes very succesful and it’s valued in billions and as a majority shareholder it makes my net worth now a billion dollars. Am I hoarding billions in value?

    If you are somehow 100% in charge in the production process of your business, and have no employees, and don’t meddle with politics, information distribution, pay your fair share of taxes, and (this is the important part) discovered a way to actually spend your billions in a way that actually reduces how much money you have so eventually you only have a couple millions, then no, you wouldn’t be hoarding wealth.

    The reality is that all those things being true are extremely difficult and even more so rare - the only closest example I can think of in recent history being MacKenzie Scott.

    Now, the reason the last point is important is because if you _don’t _ spend that money significantly, you actually start to contribute to inflation yourself because more money has to be printed so everyone else doesn’t run out, because otherwise you’d see economic collapse.

    Except then comes the issue of spending billions - it’s extremely difficult to spend that money, _ without making more money._ A bit tongue and cheek, but to get an idea of how that would you can watch an old movie called “Brewster’s Millions” that’s a decent visual example. And in case you’re getting a little lost again, value = money. If you make more money despite spending it, you are, whether purposefully or not, hoarding it.

    This leaves you with only 3 options to not hoard:

    1. The government taxes the excess. This would also help control inflation. This hasn’t happened because of billionaires that want to hoard money. A recent example is the misinformation campaign in California.

    2. Donating to charity. This is surprisingly difficult and takes years. See MacKenzie Scott.

    3. Divvying up your value among all your workers. The easiest way to actually not hoard billions.

    What is “value” here?

    Here’s the most absurd part about it all - value is literally perception. It’s even worse under a fiat system because that valuation isn’t even tied down to something fixed and physical like with the gold standard, but can be tied to a commodity like oil.

    The benefits are a country not rich in a certain resource can still generate a lot of value. But fiat still has many issues, like how easy it is to manipulate value. This leads to excessive inflation and way more economic bubbles and recessions.

    So to recap; value = money = power. Value also = money^x when high and concentrated enough.