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Why is inflation desirable? (lemmy.world)
submitted 11 hours ago by to c/asklemmy@lemmy.world
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I've been wondering this question for a while. Ignoring current events, why is a little bit of inflation desirable?

I do understand that it's done to "stimulate" the economy so people don't let their cash rot in a checking account, but isn't it a zero-sum game? Everybody says that money is not meant to stay where it is, rather, should flow through the economy. But if the economy always needs injections of liquidity because otherwise it fails, isn't the economy broken?

I feel like there's something I can't comprehend about that.

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[–] 18 points 10 hours ago (1 child)

Yes, but a healthy economy becomes more active if there is a healthy inflation to provide additional lube. 2% is roughly where inflation offers pretty good lubricant without being a pita

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  • [–] 18 points 9 hours ago

    It's worth calling out that there's no real justification for that 2% figure. It's a number that was pulled out of the air by the New Zealand version of the Fed in the late 80s, and it seems to work well, so everyone copied it.

    There's pretty broad consensus among economists that deflation is bad, and that inflation above about 3-4% is bad. Beyond that, we're literally just guessing.

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