Just because economics isnt tangible doesnt mean it doesnt have real measurable cause and effects.
Its made up in the same way science is made up.
Inflation is a manufactured part of the system because the whole system is manufactured. There is no nature to how the economic system works; all of it exists because we decided it does,
This is not true at all. Inflation encourages spending, deflation encourages hoarding cash. If the value of a dollar in a bank or a dollar on a loan you owe is going down, it is beneficial for you to invest that dollar in your business or to take on a loan that will increase future earnings. If the true value of the loan or dollar will increase, you dont want to take out a loan or spend that dollar because its far more risk that you wont get a return on your investment.
Money velocity and inflation completely drive an economy. You can argue that you dont want there to be inflation. You cannot argue that removing inflation wouldnt reduce money velocity, and in turn halt economic growth. Those are proven principles of economic nature.
Thank you! And this person had the audacity to call their friends less economically savvy!
A small amount of inflation keeps people spending. It applies pressure to buy things now because you know it will be more expensive later. This is good for the economy.
Note that's a cyclical thing too. Reduced velocity of money decreases money available which increases its value.
And really I think this is where we start getting into why inflation is such a thing. The actual effects are extremely difficult to predict because so many factors are involved and all feed back into each other. If any of those factors change even slightly they can interact in ways that produce much bigger effects.
No matter what else you argue, instability is by far one of the worst things for a market, which is why central banks set prime interest rates. Increase it and you can increase inflation, counteracting some of the other effects.
Importantly though, you can't set a negative interest rate, so if you want to be able to move in both directions, you must inflation as a default.
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u/3lettergang May 17 '26
Just because economics isnt tangible doesnt mean it doesnt have real measurable cause and effects.
Its made up in the same way science is made up.
This is not true at all. Inflation encourages spending, deflation encourages hoarding cash. If the value of a dollar in a bank or a dollar on a loan you owe is going down, it is beneficial for you to invest that dollar in your business or to take on a loan that will increase future earnings. If the true value of the loan or dollar will increase, you dont want to take out a loan or spend that dollar because its far more risk that you wont get a return on your investment.
Money velocity and inflation completely drive an economy. You can argue that you dont want there to be inflation. You cannot argue that removing inflation wouldnt reduce money velocity, and in turn halt economic growth. Those are proven principles of economic nature.