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Why is inflation desirable? (lemmy.world)
submitted 11 hours ago by to c/asklemmy@lemmy.world
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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.

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[–] 10 points 11 hours ago (3 children)

Inflation, especially unexpected inflation, benefits debtors. The biggest debtors in the world are governments. It's not zero sum. It creates winners and losers.

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  • [–] 5 points 10 hours ago (1 child)

    This is the best answer. At just 2% inflation, by the time you're paying off that 30-year bond, it only costs 50%. Government can stay in perpetual debt, pumping money into the private economy, and inflation effectively pays off the debt.

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  • [–] 1 point 8 hours ago* (last edited 8 hours ago)

    yes, but this also assumes growth. you can have poor or no growth, and that introduce other problems with government debt.

    and governments are not 'debtors' they hold debt, yes, but they can also manipulate the economy directly through politics and policy. your average person in debt, can't do that.

    another fatal mistake people make is thinking government debt, business debt, and personal debt, are all the same. they aren't. they all have different rules and different mechanisms for how they are assessed and businesses can do things people can't.

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  • [–] 4 points 10 hours ago

    Sorry for the pedantry: zero sum means it creates winners and losers, because you can only give someone more by taking it away from someone else. “Not a zero sum” means you can create winners only, because you can generate value to give someone without taking it away from anyone else. Economy is never zero sum: a bad economy is bad for most, and a good economy is good for most. Cronies exploit poor people in both good and bad economic circumstances.

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