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Why is inflation desirable? (lemmy.world)
submitted 15 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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[–] 34 points 14 hours ago (7 children)

So inflation isn't actually good, it's an active economy that's good

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  • [–] 14 points 13 hours ago (3 children)

    Inflation itself is also good, assuming your salary goes up at the same rate.

    If you take out a home loan, then over the 30 years you pay off the house, the mortgage payments make up a smaller and smaller part of your paycheck.

    Same for car loans, and student loans.

    Basically, inflation encourages smart use of debt.

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  • [–] -3 points 12 hours ago (2 children)

    so basically inflation is good only if you are one of the wealthy ones. being able to get a job that pays enough so you dont have to live hand to mouth. can even get a loan, pay it off and still have some money left over to maybe live. Also having a job you can trust doesnt kick you off at moments notice is also required to even consider any debt.

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  • [–] 8 points 12 hours ago (1 child)

    Over the long term, wages go up. Over the short term, people get left behind.

    There are lots of things that suck for individuals, but are good for the economy as a whole. There are also lots of things that suck for the economy as a whole and are great for a select few.

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  • [–] 2 points 8 hours ago*

    This is why the bedrock of any sane civilized population is public education. We try to give most individuals the opportunity to learn as much about how our society works as possible to give individuals the best chance at success available.

    This is also why the current geopolitical situation was built on decades of undermining public education with homeschooling and "parent choice" initiatives. The USA's "No Child Left Behind" Act created an entire generation of children ripped out of public schools after decades of defunding public education created such poor conditions that parents were duped into believing dismantling public education was the solution.

    Uneducated kids become ignorant, easily manipulated voters. Social media algorithms were specifically engineered to exploit this mechanism.

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  • [–] 21 points 14 hours ago (2 children)

    Yes, but a healthy economy becomes more active if there is a healthy inflation to provide additional lube. 2% is roughly where inflation offers pretty good lubricant without being a pita

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  • [–] 23 points 13 hours ago (1 child)

    It's worth calling out that there's no real justification for that 2% figure. It's a number that was pulled out of the air by the New Zealand version of the Fed in the late 80s, and it seems to work well, so everyone copied it.

    There's pretty broad consensus among economists that deflation is bad, and that inflation above about 3-4% is bad. Beyond that, we're literally just guessing.

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