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.

you are viewing a single comment's thread
view the rest of the comments
[–] 4 points 5 hours ago

Because money has no value except when its used. This is actually a problem for modern economies (in the us but it has global knock on effects) because a combination of things have caused investing to be like savings. taxs cuts, lack of regulation, individual retirement savings, etc. it all leads to "investing" in market funds which is basically dumb (passive) investing by which I mean is decisions are not being made on something being better than another. Which is the purpose of the market really. Its also why robust social services are good economically. It encourages the average person to spend in the present without concern for the future (ideally) which keeps money flowing which is what you want. Its kinda funny because countries will go ape trump over subsidizing an industry but things like universal healthcare is literally like subsidizing all industries. I knew people from europe working on contracts in the us who did most medical things in visits back home along with insurance that allowed them to deal with catastrophic things abroad. This worked because us position pay more in the us to deal with the medical expenses and retirement the individual needs to pay for.

  • source