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> there is a pressure with USD to inflate the currency steadily over time, so your dollars lose value as you save them. Why does that pressure exist? Simply be
by SCdF 14y ago
> there is a pressure with USD to inflate the currency steadily over time, so your dollars lose value as you save them.
Why does that pressure exist? Simply because they print more money because it makes their lives easier?
- jmillikin 14y agoIn a modern economy, inflation acts as a tax on idle cash. This encourages people and organizations to keep their wealth in forms that help the rest of the economy. A thousand dollars under your mattress isn't doing anything for anyone, but in a bank account, equity, or bond it can be used by others to finance their business. The higher the inflation rate, the more pressure there is to invest instead of hoard. Governments adjust the inflation rate via mechanisms such as making large loans to major banks ("printing money") or selling bonds. The goal is for the economy to experience constant slow growth at the minimum practical inflation rate.