Deflation is bad. Then people stop spending, postpone all purchases, economy grinds to a halt, people lose jobs and companies go bankrupt.
Hyperinflation is bad. Then people spend money like toilet paper: money becomes worthless. No one has anything left to invest or to save for pension or a big plan or dream.
The general goal of aiming for about 2% inflation is basically just there to try to prevent those two worst case scenarios from happening. It’s the least bad of all evils: money sort of keeps it’s value, evolution of product prices are rather predictable, people know what they will be able to buy with their wages. Inflation is not inherently tied to capitalism only. Socialist/communist economic experiments experience very similar phenomena.
The 2% inflation (together with property taxes) also forces the wealthy to keep their assets producing wealth for people other than themselves.
If they could just hoard money for generations without it deflating to worthlessness, then the level of investment and jobs would be dramatically less.
This is how the landed gentry of medieval Europe could keep all the land tied up for hunting while not having to give a shit that the serfs were starving.
Currently you have to keep your assets earning to pay for themselves which generally leads to employment and broad increases in living standards.
The general goal of aiming for about 2% inflation is basically just there
To guarantee on a long timeline the rich make steady money…
Even this short term volitility is how they make the giant leaps in wealth.
And buddy…
Socialism still has it, because socialism is just ethical capitalism. It not “not capitalism”, it’s just not a complete free fall. I thought you knew what you were saying till that bit.
Deflation is bad. Then people stop spending, postpone all purchases, economy grinds to a halt, people lose jobs and companies go bankrupt.
Hyperinflation is bad. Then people spend money like toilet paper: money becomes worthless. No one has anything left to invest or to save for pension or a big plan or dream.
The general goal of aiming for about 2% inflation is basically just there to try to prevent those two worst case scenarios from happening. It’s the least bad of all evils: money sort of keeps it’s value, evolution of product prices are rather predictable, people know what they will be able to buy with their wages. Inflation is not inherently tied to capitalism only. Socialist/communist economic experiments experience very similar phenomena.
The 2% inflation (together with property taxes) also forces the wealthy to keep their assets producing wealth for people other than themselves.
If they could just hoard money for generations without it deflating to worthlessness, then the level of investment and jobs would be dramatically less.
This is how the landed gentry of medieval Europe could keep all the land tied up for hunting while not having to give a shit that the serfs were starving.
Currently you have to keep your assets earning to pay for themselves which generally leads to employment and broad increases in living standards.
To guarantee on a long timeline the rich make steady money…
Even this short term volitility is how they make the giant leaps in wealth.
And buddy…
Socialism still has it, because socialism is just ethical capitalism. It not “not capitalism”, it’s just not a complete free fall. I thought you knew what you were saying till that bit.