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.
That’s generally not true in practice though. Nominal interest rates on loans (the rate on paper) will adjust with inflation so the real interest rate (adjusted for inflation) is positive. As others have pointed out, the banks wouldn’t accept a loss just because of high inflation.