| > So what is the real problem with inflation? Is it the economic inequality it brings to those who have to live on fixed income? 1) Humans aren't perfectly rational. A lot of people who don't understand exponential curves will end up going broke - like people who earned money and "saved" it by storing it in a bank account. To put it bluntly, a bunch of old people will be left destitute despite working hard and saving. This also affects wage earners who aren't keen negotiators. They'll quickly end up with a below-market wage and might not realise what is going on. 2) Price signals take time to propagate because the economic hive mind doesn't move at the speed of light, it moves at the speed of takes-a-few-months. There will be wild mis-allocations as people work out how to measure goods in something reliable that isn't dollars. 3) The new money has to start somewhere, that group will get a massive advantage in allocating resources. They probably aren't good at it, because if they were they wouldn't need free money, so they'll cause massive waste. 4) Triggering high inflation is bad strategy for making things better, so if it is being used the people running the show are probably not the most competent of chaps. They'll be making a lot of mistakes. Eg, usually a high-inflation strategy will get coupled with other tricks to destroy savings - think gold confiscation or wealth taxes - as people try to respond sanely to money printing. If you run the numbers on how capital gains tax interacts with inflation you have a "hey! wait a minute..." moment if you like saving money. |