I’ve been wondering this question for a while. Ignoring current events, why is a little bit of inflation desirable?
I do understand that it’s done to “stimulate” the economy so people don’t let their cash rot in a checking account, but isn’t it a zero-sum game? Everybody says that money is not meant to stay where it is, rather, should flow through the economy. But if the economy always needs injections of liquidity because otherwise it fails, isn’t the economy broken?
I feel like there’s something I can’t comprehend about that.
This is the best answer. At just 2% inflation, by the time you’re paying off that 30-year bond, it only costs 50%. Government can stay in perpetual debt, pumping money into the private economy, and inflation effectively pays off the debt.