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.
It’s pretty easy to stop minor deflation - just print more money. You might have also heard why that’s usually bad - because it causes inflation. But in this case, if for some reason you want to limit or reverse it, printing is just one way. Others are by increasing exports and imports by decreasing / increasing taxes, raising interest rates on low, increasing taxes in general.
Of course, the difference is these measures strengthen a country, unlike control measures that deal with inflation. Even the first one is less harmful these days thanks to a very global economy and modern logistics, since spreading your currency has soft power benefits (it’s why the USA did so).
Controlling inflation on the other hand is more detrimental to a country, since the methods usually affect infrastructure (reducing taxes) or global trade (restricting imports to increase local spending). You can also print less money but that increases poverty.
Hence all the recessions in recent history.