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Why is inflation desirable? (lemmy.world)
submitted 1 day 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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[–] 1 point 7 hours ago

Inflation is either expected or unexpected.

  • unexpected inflation causes hyperinflation
  • expected inflation is priced into the rates offered

The burden of inflation - who actually pays for it - falls on whoever needs the deal more. Lenders can invest anywhere, but borrowers need that money here and now. We're paying for most of the inflation as higher interest rates.

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