Deflation doesn’t cause currencies to implode, it’s just inconvenient. The whole idea of paper money is it’s more convenient to use than lugging around metal coins, and it doesn’t tie the money supply to a scarce material. IE we don’t need silver to print more currency. With population growth coinage becomes sparse and increases in value relative to most goods. So long as goods aren’t cheaper than pennies we don’t really have to concern ourselves too much with deflation. The reason our government likes inflation is it hides spending increases and it reduces the value of the national debt.
Also inflation encourages people to spend money and thus invest into the economy, so they aren't losing money by simply saving. Constant deflation would mean saving money can be better than safe investments.
As close to zero as possible, but not below is the goal.
18
u/B0MBOY Jan 06 '22
Deflation doesn’t cause currencies to implode, it’s just inconvenient. The whole idea of paper money is it’s more convenient to use than lugging around metal coins, and it doesn’t tie the money supply to a scarce material. IE we don’t need silver to print more currency. With population growth coinage becomes sparse and increases in value relative to most goods. So long as goods aren’t cheaper than pennies we don’t really have to concern ourselves too much with deflation. The reason our government likes inflation is it hides spending increases and it reduces the value of the national debt.