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Inflation doesn't decrease your purchasing power unless you're living on a fixed, non inflation-adjusted income, or from a limited pool of wealth which you keep in cash. If you're doing productive work, you can expect your wages to keep pace with inflation, and if they're not, it's very likely that without inflation you'd be seeing wage cuts; your relative value as a worker is independent of inflation. If you're living off of stored wealth, you need to store it in the form of goods, not cash. Real estate, stocks, etc. There are advantages to inflation. One is that it encourages people to keep their wealth invested in production (aside: This is also part of the economic value proposition for property taxes, which discourage non-productive land-hoarding). Another is that it discounts debt. Because debt payments are not inflation-adjusted and wages effectively are, making your payments gets easier over time. This isn't a good in and of itself, but it's a good when considered against the alternative possibility of deflation, which tends to create insolvency among borrowers. Of course, inflation can harm creditors who don't factor it into their interest rate, but this is less harmful to the economy as a whole. The ideal would be a money supply that exactly kept pace with growth in production resulting in neither inflation nor deflation. But that's hard. Because mild inflation is not particularly harmful, and deflation is really bad, policymakers prefer to aim for mild inflation as a hedge against deflation. |
Nope, we can't expect our salaries to rise along with inflation - not in today's insane world.
.. and whatever you'd feel like Googling up.>> There are advantages to inflation. One is that it encourages people to keep their wealth invested in production
That's not an advantage. Inflation does punish saving (which is bad to begin with), but also encourages risky investments. The higher the inflation, the higher the return on investments you need to not lose wealth, and the riskier your investments, the more likely you're to lose them.
So no, that's not good. Purchasing power increases are good.
>> Another is that it discounts debt.
Yes, this is why governments keep lying to us that inflation is good for us. They're trying to manage their massive debts, but they'll ultimately fail.
How about just not using money you don't have, or money you can't afford to borrow? Oh but that would curtail politicians' crony-capitalist spending, so we can't have that.
>> The ideal would be a money supply that exactly kept pace with growth in production resulting in neither inflation nor deflation
You're basically suggesting that our purchasing power should not increase. That's just absurd.
>> Because mild inflation is not particularly harmful
So even you acknowledge that it is harmful, even if not to a large extent. But what do you get if there's 2% inflation for 10 years? It keeps compounding you know. How much of your purchasing power will you have lost by then?
>> deflation is really bad
No it's not. It's your purchasing power increasing. Everyone wants to get more for less, and that's what (price-)deflation means.