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What is missing from the article (unless I missed it myself) is why inflation would be desirable in the first place. There's probably a couple of reasons, some

by steve1977 3y ago

What is missing from the article (unless I missed it myself) is why inflation would be desirable in the first place. There's probably a couple of reasons, some already discussed. Like lowering wages without actually lowering wages. And inflation is a great tool for governments to "pay off" their debt. But you have to keep the rate at a level low enough not to cause upheavals. Hence the rates of like 1% or 2%.

ImHereToVote 3y ago
Why is it so important to lower wages and increasing the wealth of bond holders?
- madsbuch 3y ago
  it had emperically shown to be effective for the economy. in the end the economy as a whole is a setup for work and collaboration. if the farmer does not want to work, i can't spend my earned money on their produce. inflation has shown to be an effective tool to ensure that people partake in the workforce. - lowering wages keeps people on the lookout for new skills and increases job mobility. lastly, inflation does not. increase the wealth of bond holders. only when they miscalculated their rate such that interest is higher than inflation. This has certainly not been the case the pa's 6-7 years where bond holders have lost big time.
gorbot 3y ago
The major reason for a base inflation this: If there was zero inflation, then keeping cash in the bank is the safest thing to do. If everyone does this, money moves less, less investment, slower economy. Sure some will still invest, but the vast majority of people will just put money in the bank, or under their mattress. With >0% inflation, you now need to do something with your money or else you lose money. If my great great grandparents buried their life savings and gave I received it now, I'd get a new laptop and that's about it. So now everyone has to invest it. 401k's, other investments, etc. This makes the economy start moving, more activity, this is the 'velocity' of money they mentioned as being a key factor in the health of an economy.
- steve1977 3y ago
  But isn't that "artificial" growth of the economy than basically eaten up by the inflation?

ImHereToVote 3y ago

Why is it so important to lower wages and increasing the wealth of bond holders?

madsbuch 3y ago
it had emperically shown to be effective for the economy. in the end the economy as a whole is a setup for work and collaboration. if the farmer does not want to work, i can't spend my earned money on their produce. inflation has shown to be an effective tool to ensure that people partake in the workforce. - lowering wages keeps people on the lookout for new skills and increases job mobility. lastly, inflation does not. increase the wealth of bond holders. only when they miscalculated their rate such that interest is higher than inflation. This has certainly not been the case the pa's 6-7 years where bond holders have lost big time.

gorbot 3y ago

The major reason for a base inflation this: If there was zero inflation, then keeping cash in the bank is the safest thing to do. If everyone does this, money moves less, less investment, slower economy. Sure some will still invest, but the vast majority of people will just put money in the bank, or under their mattress. With >0% inflation, you now need to do something with your money or else you lose money. If my great great grandparents buried their life savings and gave I received it now, I'd get a new laptop and that's about it. So now everyone has to invest it. 401k's, other investments, etc. This makes the economy start moving, more activity, this is the 'velocity' of money they mentioned as being a key factor in the health of an economy.

steve1977 3y ago
But isn't that "artificial" growth of the economy than basically eaten up by the inflation?