The only way that the press, or for that matter central banks, can manage to pul their crap on you is to omit the mathematical foundation behind what they espouse — and hope you’re either too lazy or ignorant to bother doing the work yourself.
While declining prices can be good news for consumers, disinflation makes it harder for borrowers to pay off debts and businesses to boost profits. The greater danger comes when disinflation turns into deflation, which leads households to delay purchases in anticipation of even lower prices and companies to postpone investment and hiring as demand for their products dries up.
And what does inflation do on a compound basis?
Remember, it’s not how many dollars (or Euros, or whatever) you have — it’s what they buy!
The problem with “inflation” isn’t the one-time hit. It’s that such rates are compounded. Over 30 years a “mere” 2% inflation rate costs you nearly half — 45% approximately — of your purchasing power.
“How can 2% hurt me?” you ask. That’s how.
Second, let’s talk about the alleged “fear” of deflation a bit. What has happened in, for example, the price of personal computers? Prices havemassively deflated for a given capability, right?
What has happened to the penetration of ownership and capability of those computers and what their owners can do with them over the same time?
Is that good or bad?
More to the point, haven’t computer makers done perfectly-well in this world of deflation?
They sure have!
Does deflation make it harder to pay debts? It sure does. So what? Debt, in the general sense, is bad. It is only “good” when it permits you to grow output fast enough to pay the service costs and retire the debt at the same time. In all other cases it either simply pulls forward demand (in which case it does nothing) or it allows you to temporarily (but not permanently) live beyond your means, which is manifestly bad because when you stop doing that you must then live below your means to pay it off!
Making debts harder to pay isn’t bad, it’s good for the simple reason that debt in general is negative for society as a whole. It’s very profitable for the people selling you the debt, of course, but that’s not the test; one must look at the impact on everyone, not just the favored few.
Inflation cannot be “weak”, in point of fact, as it should be non-existent over time.
Absent intervention in the economy the natural process of price is mildly deflationary. That is, over time the natural progress of mankind improving process and procedure through technology results in a lower price for a given unit of “stuff.”
That’s demonstrably and provably positive for society as a whole: Having to work 5 hours instead of 10 to pay for your weekly food intake, or 1,000 hours instead of 2,000 to pay for a car is positive for the vast majority of the people in the economy.
It is only the debt merchants that want things the other way around.
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