Why do people think Inflation is so bad?

I'll never understand peoples infatuation with inflation. You always hear stories of how a loaf of bread a hundred years ago cost $.25 where it costs couple dollars now and how it's "stealing wealth", etc. But they always leave out two significant factors

1) There is more money
2) Since there is more money, there is room for more demand for YOUR goods/services/investments/wages allowing you to make MORE money

For instance, I'm 27, have made a very good salary for the past 5 years, my family always has had money, my friends have money, etc. Buying a loaf of bread for $3 is easy, I can buy millions of items that no one could buy 100 years ago. We can buy iphones, cars, snowboards, flat screen tvs, video game systems, comfy mattresses, lamps, etc, etc. All of these items are fairly cheap to buy. I know poor people that make $40k a year that can get an iphone, a car, and a tv.

And even though I make quite a bit, I'm still not in the top 5% of wage earners in the country. Over half the country makes over $26,000 a year. That's mathematically impossible with out monetary inflation. Every one of us wants to make more money next year than this year. With out monetary inflation it would be impossible for the country to be net gainers. As in any money I made would have to be someones loss. Monetary inflation allows many of us to continue growing our wealth.

Why wouldn't anyone want another $1 trillion dumped in the economy when it's struggling like this? All that money being funneled in to businesses, buying up assets, investing in the stock market, etc, etc. I would love it if we had a little inflation.

I understand inflation can hurt some people. But those are by far the minority in the country. People who live on fixed incomes and people who save cash in their mattresses.

So does someone have a good reason why inflation is so bad even though in my reality I can purchase just about anything I want and anything I can think of wanting there is a plethora of options and I know I'm not even close to a "wealthy" person?

 

I don't get why deflation is supposed to be tragic..

 

Because then the medium of exchange becomes an investment in itself. Who would want to buy or invest in things if they knew prices were going to be lower in the future?

Plus who would want their investments and assets to become worth less?

 

Happens with computers and other gadgets, doesn't it? People still invest in them. I don't see how your investments would be worth less, though. If your currency is increasing in value, your assets are growing.

 

Conservatives are always (*)(*)(*)(*)(*)ing about inflation because they need a boogeyman to scare people to vote for them.

Just like they have to invent enemies to keep massive military spending going.

 

The only people who benefit from inflation are those who reap the profit in the form of interest, i.e. "growing their money," which of course happens at the expense of everyone else.

 

I don't have time to go into other thoughts at the moment. Regarding your contention that wages will also go up due to inflation - this may be true, but timing is often a problem. Wages usually adjust slower, so if the cost of bread goes up now and your next wage adjustment is in 6 months, you're out of luck. That, and inflation is great for borrowers but bad for lenders (loans can be paid back with "cheaper" dollars) - hardly the incentive we'd want to promote, I think.

 

Wages are flat. Technically, they are lower because they have not even met par with inflation.

 

That's one example of impulse buying. And plenty of people wait for things including computers and other gadgets to drop in price. The only people who buy them when they first come out are people who want the product regardless of price. But that one example can not be extrapolated to an entire deflationary economy where everything starts dropping in price.

 

Well, if a lot of the countries wages, especially the middle and lower class, have stagnated, and the price of goods, rent, gas, etc, goes up, that would hurt pretty bad, no?

 

I agree that wages not increasing at a rate of inflation does in fact affect those who can not increase their wages. I have yet to hear of any solution to this problem that would make those wage earners better off. Deflation certainly doesn't help many wage earners.

And that's where interest comes in to play. Lenders are far from the people we should be worried about.

 

But they're always depreciating. You can always wait and get a better deal later on, whether it's in the form of the same model at a lower price or a better model at about the same price.

 

Because food and energy prices are rising while wages remain stagnant. No amount of speculative hypothesizing on the OP's part will change REALITY.

By the way, it's nice to hear you and your family are doing well. Must be why inflation doesn't bother you...

 

If, but why would prices continue to rise if people weren't making more money? This demand for goods and services isn't magical. People can afford these goods and services even if they are complaining about the costs. I'm a common sense economists. I understand no one wants to pay higher prices, I of course don't... but I know I can afford higher prices. Do I hate paying $4.30 at the pump for gas, of course. Can I afford it, yes. And seeing how there is a nonstop flow of traffic going in and out of gas stations, grocery stores, wal marts, costcos, etc... it seems plenty of people are able to afford it.

 

Inflation is a problem in the short term because people wages don't keep. Inflation generally screws the working poor.

Put it this way in 1965 when Lyndon B. Johnson announced the war on poverty, the poverty line for a family of four was 4k a knew home cost 17k and a new car could be had for 2500 dollars for a midsized sedan. The PC wasn't even a dream. A calculator that could do trig functions was the size of a desk if you could find one at all and slower than using slide rule.
A doctors visit was 25 bucks but there were no MRI machines or CT machines and most cancers were automatic death sentence.

An honest poverty line today approaches 40k, and while there is more money there is also 100 times more stuff to spend it on.

 

It also punishes people who save their money.

 

I'm not arguing that stagnant wages aren't a problem. I just have yet to see a solution that solves this problem that does not involve the Govt and I do not see how deflation would help wage earners more than how much they are hurt by inflation.

It seems you guys are just picking out the problem areas of inflation with out having any solutions that would make those areas better.

Sometimes having a wage that is losing to inflation is better than not having a wage at all.

I'm only using myself and my family as an example because we aren't part of the "wealthy" class. So there are millions upon millions of people richer than us, and we have more than enough money to afford higher costs of bread. So I'm trying to figure out where this "inflation paranoia" is coming from.

 

That's just a made up poverty line. It's more of a standard of living line. $40k is more than adequate to live off of. In fact the median household income is over $51,000. That means half the households in America make over $51,000. There is a lot of money out there and a lot of people with a lot of money. So I'm still not getting any evidence as to why we should stop targeting inflation and why we should not dump a trillion or two trillion more dollars in to the economy.

 

That's one example of a luxury good and does not mean that deflation of other goods and services would work like that. Especially investors and those with large amounts of capital. I buy the iPhone when it first comes out because I can and I want to have the newest technology. However, if I had money to invest in the stock market or other assets and I knew those prices were going to be less in the future, why would I invest in them?

 

Just because you can afford it, doesn't mean there are others that can't. It hurts, especially the middle and lower classes. Higher rent, food, gas prices going up, and other things. Not only does it hurt the middle classes and below, it hurts the economy overall, because they aren't going to be able to spend money or luxurys, vacations, and things of that sort.

 

Simple answer: Inflation isn't constant across the whole economy. While inflation is driving up the price of goods it is not driving up wages (the price of labor) at an equal rate. Add in the factor that just because the corporation you work for makes more money in sales, that doesn't mean that you make more money because you work for them and you can understand how what we see in the real world is that inflation drives up the cost of goods and services while working class people don't see equal increases in wages meaning they have less money in effect.

 

This is also very true.

 

The solution is to allow currency competition, that way individual market participants can CHOOSE inflation or deflation for themselves. In fact, they can even choose to have no movement in the value of the currency. Freedom of choice and markets are the best allocation mechanism, period. It's a fact.

 

Your use of worth here is incorrect. With inflation, your investments aren't worth more. What you attribute to inflation is actually increases in productivity. Folks do not actually gain more wealth through inflation unless of course they are positioned to reap the benefits of higher currency levels very early in the cycle which almost 100% of the people are not.

 

Anyone with an interest-bearing savings account is a lender. Why should we punish those people to reward those who have lived beyond their means and have huge credit card debts?