4 ms·

The US Dollar gets debased significantly. Its value deceases exponentially in comparison to gold (for example).

• AnimalMuppet 5y ago
  OK, let me be more precise: I do not care about small amounts of steady, predictable inflation. (I care more about the monetary authorities having room to maneuver to prevent deflation, which is far more damaging than inflation.)
  • Capira 5y ago
    Why do you think deflation is bad? Wouldn't it be great if things got cheaper over time such that you would buy fewer products with better quality?
    • AnimalMuppet 5y ago
      Sure, that would be great. What tends to happen, though, is that people have borrowed money to buy things, and now dollars are more expensive to pay back those loans. Some of those who have borrowed are now underwater - they owe more than the value in dollars of the asset that they bought with the loan. Some of those will sell their assets (or the bank will do it for them). Now you have higher-than-normal selling, so the price goes down. Now more people are underwater, so it keeps going. And some of those "people" are businesses, and some of them fail because of this. Now some people don't have jobs. Prices are lower, but that doesn't help you if you have no income. This isn't just theory. Look at several of the financial panics in the 1800s, and you'll see this in action. When it happens, it's very destructive. It wipes out lots of people. So, a slow, steady, predictable deflation might be a good thing - if it could be and remain stable. But there are lots of examples of it not being stable...