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Asked a question 3 months ago

Is inflation good or bad for the economy?

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Sam Colt
"Guy that provides the proper Experimental Design"

To borrow from drinking: It's al about the dosage. Everything can be fine until you have "one more drink". 

In that sense, inflation isn't necessarily bad but also importantly depends on the POV. Too much of it is definitely not "good" for consumers (erosion of purchasing power). While at the same time It's not too bad for those that have lots a debt (like governments). 

Anthony Fallucco
Student of Austrian Economics & Bitcoin enthusiast.

If you ask a Keynesian they will try and justify that deflation is bad and inflation is needed to grow the economy. Ask an Austrian and they'll argue growth should come from savings and deflation is a good thing brought about by technology. Oversimplified explanation but when answering this question also ask yourself which economic theory has allowed for the largest transfer of wealth in human history and then ask yourself if inflation is truly good for the economy.

I agree with those who are saying it depends on the dosage if inflation is good or bad. There will always be inflation or deflation as long as there is an imbalance of money supply to good and services (I believe there always will be even if we get rid of central banks, as long as the thing we use for money does not grow in exact proportion to goods and services, which I'm not sure is possible).

Inflation will always affect people in different ways, for example if I am a business owner and can pass the cost of inflation on to consumers this is beneficial to me as my revenue is inflation proof, and in some sense my purchasing power increases as whilst inflation decreases the purchasing power of everybody else, it does not affect me. If I own assets which grow with inflation, fantastic, if I own debt maybe not so much.

The real problem is when inflation/deflation gets out of hand because, as Drew has mentioned, that's when the inequality starts because the different ways inflation affects people as I mentioned above start to have a greater effect (i.e if I give people varying amounts of water, if the variance is only one or two cups, it is fine. If I start letting people die of thirst whilst waterboarding others then the effects start to really cause differences in outcome to people)

Inflation is necessarily bad for the economy, or at least demonstrates some level of weakness which results in inflation.  A broad increases in the prices of goods and services means that the productive economy can’t keep up with demand at current prices or that pricing power has shifted toward sellers and away from buyers.  Of course low levels of inflation are much less damaging than high levels and there is a lot of ruin in a nation so its barely noticeable, but definitionally it is a negative.  

To a degree managed inflation is probably ok. When it becomes not possible to “manage” (I think as we are seeing now) it become a potential financial cliff.