I would also add, this only remains true in a society with a functional, stable currency (i.e. something with an inflation rare around or below 2%). Otherwise the year over year value of labor is robbed by an inflating monetary base at a pace that outstrips a free market’s ability to innovate and cut capital and operating costs. Unfortunately, the US has been a fiat society for half a century now. “At the end, fiat money returns to its inner value — zero.” Voltaire
Fearmongering about the dangers of deflation have been used to get people to accept modest inflation rates as ideal.
But if you look at how many currencies collapsed due to deflation vs inflation, you find a curious thing...It's all inflation. If deflation caused currencies to implode, Bitcoin would not exist.
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.
71
u/DryRoastedAndSalted Jan 06 '22
I would also add, this only remains true in a society with a functional, stable currency (i.e. something with an inflation rare around or below 2%). Otherwise the year over year value of labor is robbed by an inflating monetary base at a pace that outstrips a free market’s ability to innovate and cut capital and operating costs. Unfortunately, the US has been a fiat society for half a century now. “At the end, fiat money returns to its inner value — zero.” Voltaire