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.
Where am I?
In The Exchange you can ask and answer questions and share your experience with others!
The biggest falacy of the inflation camp is that they tell you that a certain amount of inflation is good, usualy around 2%, no more no less. How did they calculate it? The idea that a group of government bureaucrats can correctly calculate the ideal level of inflation for the whole economy is as absurd as the idea that.... a group of government bureaucrats can manage the economy of the whole Soviet Union from Moscow
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)
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).
Inflation vs Deflation debate: How do you guys see inflation / hyperinflation in the developed world given demographics ... intentionally or unintentionally?
Is velocity of money really an indicator for when inflation will show up in the economy? Isn’t it possible that ... situation velocity decreases. Thoughts?
INFLATION PRINTS (unfortunately they only come once a month) will become more important going forward as ppl calibrate ... of tips breakevens + commodities + ???