107
Why is inflation desirable? (lemmy.world)
submitted 1 day ago by to c/asklemmy@lemmy.world
104 comments fedilink hide all child comments
 

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.

you are viewing a single comment's thread
view the rest of the comments
[–] 3 points 1 day ago*

According to the oft-repeated conventional wisdom as I've heard it, deflation is bad. Therefore they try to maintain a small positive inflation rate so that there's some margin for error before it tips into a deflationary spiral. This understanding came in large part from the Great Depression, and everyone wants to avoid that happening again. Central banks think it's worth putting up with a little inflation to avoid the risk.

There are other reasons why inflation might happen but they're not typically thought of as desirable.

  • permalink
  • fedilink
  • source
    •