this post was submitted on 20 May 2024
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I mean centuries of inflationary monetary policy also caused bubbles, sooo...
Yes, but that was caused by other factors, while deflationary policy directly leads to them as it punishes spending, but rewards accumulation. As a result, everyone sits on a pile of cash, and they either don't spend it, like, ever, grinding economy to a halt, or start buying, strongly depreciating the currency and forming a death spiral.
I am aware of the basic arguments behind inflation/deflation, and neither is good in excess.
Typically central banks targets inflation of 2% these days, but we all know the real inflation for necessities is far higher (>4%). Inflation disproportionately affects the poorer - rich people have the fast majority of their wealth "stored" in stocks or real estate, which rise in valuation as people rush into these markets to protect the little they have. I'd argue that inflation rates are artificially pushed far higher then is sustainable, simply because those who decide are the same people who benefit the most.
I consider a low but predictable inflation rate about 1% ideal (0-2% is acceptable short term variation) for the following reasons:
Yes, this idea is not without risks. But the way I see it the forced "we have to improve value by 2% every year" exponential grow can only go on so long before we (humanity) hit the finite limits of this planet.
Absolutely! Inflation has to be lower, that's for sure. I'd even argue that the need for inflation is more of a feature of a capitalist economy.
Having to force spending/investment is only important as long as the very economy is built around overconsumption and private investment.
We can absolutely live with a more or less stable currency if we focus on sustainability and put the people first. Money should return to be the means to just get what we need, and we should stop building the economy around creating artificial demand.