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.

  • tatterdemalion@programming.dev
    1·
    56 minutes ago

    Deflation (opposite of inflation) encourages people to put money under the pillow and wait for it to increase in value. If everyone does this the economy stagnates.

    I think this deserves a bit more discussion actually. I don’t think it’s a given that the economy stagnates nor that an ever-growing economy is a good thing.

    At the end of the day, people must spend their money to get things they need. Hoarding money isn’t actually sustainable unless you already have more than you will ever need.

    I actually think it sounds kind of nice to have an economy that is neither inflationary nor deflationary: it’s just stable because the economy is sized perfectly to sustain the people within it and make them happy.

    It’s the insatiable greed that drives economic growth (at any costs it seems). I’m not sure whether population growth inherently grows the economy, because each new person is both an asset and a liability.