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.
Let me add: I’m an engineer. By reason of existence, my work involves improving how we do stuff. My work involves helping people work more efficiently, use fewer resources, cost less etc. We should be doing more, with less because the tools and methods get better. So why do things keep getting more expensive? I don’t grok inflation. Not a bit of it.
The right way to look at how expensive things are is to normalize prices to other things that also change with time, for example wages and expectations.
A car may be more expensive now than in 1960, but the car is faster, safer, more comfortable, and more people have one now.
Same with many improvements- an iPhone today is more expensive than a Nokia 3210 was in 2000, but it has more features and more people have one.
It is against human nature to stay where we are and just use improvements to reduce the amount of work we need to do. We want to have more. That may be a bad thing for sustainability, but we typically expect our governments to support that kind of progress, hence the dual mandate of the central bank to maintain economic growth with a high level of employment and a low level of inflation.
But lots of things do get cheaper. You can buy a fucking miracle device like a smartphone for a weeks work. Everything you want gets cheaper, everything you need gets more expensive.
Can of coke cost a penny. Now it’s closer to a buck?