FYI: A reader asks:
What’s the deal with inflation? It’s bad for our individual spending power. It erodes the value of our money. Yet, the economists want 2% inflation per year every year. Why do we need inflation for a healthy economy? Why can’t we have a 0% inflation goal?
I get the idea behind being against inflation. Why would people want to see prices rise over time? Wouldn’t people benefit from lower or stable prices?
In theory, this seems rational but theory rarely works in the real world. In the real world, the economy operates based on expectations. And, right or wrong, inflation and deflation bring about a very different set of expectations about the future, which can subsequently impact the present.
Regards,
Ted
http://awealthofcommonsense.com/2019/06/why-do-we-need-inflation/
