Why is Some Inflation Good?

-- David discusses why some inflation is actually a good thing
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#pakmanfinance #inflation #rates

[mrviz]

An economy based on a money that hold its purchasing power and does create deflation and an incentive to save would be very interesting. When we work and produce economic output we could store that time and energy in that money and it could purchase the same or more goods and services down the road as it could today. It would probably end throwaway culture and mass consumerism as people would be more incentivized to save and every purchase would have to be weighed against the pros and cons of utility from buying now at a higher price or buying later at a lower price. The economy would be much different but I’m not convinced inflation is responsible for productivity rather than over consumption of goods and services. I think a deflationary money would lead to better quality products instead of the planned obsolescence world we live in today that counts on over consumption, money printing, and purchasing power corrosion to even exist.

[KumoCC]

thanks for this channel, David! as an econ major, some of this is very familiar, but your explanations are concise and easily understood, very valuable if you can keep this channel growing

[steshaw]

It's generally accepted that a little inflation is good (say 2%), but that is wrong wrong.

[maxrice]

I get this whole argument, but what does the consensus opinion have to say about the fact that targeting 2% inflation over the course of a generation sets up the next generation that starts with no assets up for failure?

Even if a 22 year old now just getting started has wages that keep up with inflation, he has no net worth and big assets such as a college education, a home, and a vehicle have moved so far up in price over the course of 50 years of intentional 2% inflation.

[Radzoso]

How much does government spending contribute to inflation?

[peter-hrgl]

Inflation is simply rising prices. If you keep your prices the same, that can mean as a business you are effectively managing your expenses and/or you are efficient in your business practices. The problem with inflation over time is the erosion it represents in purchasing power if your wages don't rise in conjunction with prices. Over short periods that is not as much of an issue as it is over longer periods (except for certain heartburn areas that people purchase the most of such as gasoline and food today). We had a pretty good run of having a period with low inflation (and even a couple times where it was near zero). I don't seem to recall any negativity flowing about that and yet when the opposite happens all H breaks loose. While I agree that years of high inflation is BAD, a year or two is more like a period of bad heartburn. It hurts at the time and can be very uncomfortable, but after it passes you look back and wonder what all the stink was about (and go back to eating spicy food). The high inflation period of the late 1970's and early 1980's is either a non-memory for younger people or a distant memory for those old enough to have lived through that period. Now the younger people will be able to say in years ahead the high inflation period they lived through. This too shall pass.

[jackhamerordewey]

Can you speak about credit? I heard sometimes it is a waste of time to build credit.

[svenkaahedgerg]

So i sounds like no inflation, after closing the gap created by too high inflation with deflation, would work because then there would not be any need for raised salaries?

[padx]

okay so how about we have deflation but just for essentials, like housing, food, and energy. but have prices mostly stable for non-essentials, like tv's and video games.

[kdhlkjhdlk]

If it wasn't for inflation, you would be incentivized to wait and live within your means instead of CONSUMING EVER MORE.

Also the wages line needs to be horizontal - don't lie to people.

[vonvonvonvonvonvonvonvonvo]

So, what you're saying is... inflation isn't good because it actively encourages consooomerism instead of smart and planned spending?

btw, 3% inflation will turn into 12.5% in just 4 years

[Khanji]

What about stable prices? How it is bad for economy ?

[jsrchmnd]

What about inflation reducing your debt burden. Like if you bought a house 15 years ago.

[andrewsinkinson]

Nah. Overwhelming majority in US has less than 500 on hand. Your models assume that the portion of GDP driven by those who can wait to make purchases is larger than plebs everyday purchases. How does the poor purchase pie stretch farther when very few are saving? Its all spent every month anyway except that we experience a crappier quality of life.

[hanzn]

It's hard for me to believe that real people actually believe this nonsense

[programking]

Um, this isn’t really accurate. The purpose of 2% inflation is to keep nominal interest rates high enough away from the zero lower bound to be a problem. 0% inflation would, in the long run, would not affect economic growth.

[jordan]

So glad that you can tell me that I don't matter after you got 2 major ad campaigns to make you more money. Inflation is good because I cannot afford a house, I can barely afford insurance for a new vehicle, but the banks won't give me a loan unless I buy a new vehicle. I can't buy food at a low cost because everything is designed to make me barely above poverty. Inflation allows those that have a 100k nest egg to never have to worry. I am not one of those that got a 100k for free from my parents. How about we put a 30% flat tax across the board, no loopholes. Corporations gets hundreds of millions in tax credits that the average person cannot afford.

[benruby]

You should make videos on all your channels about the key parts of economics all economists agree on. You know the parts of reality that seem conservative and right wing but are really just an unfortunate part of existence and being part of humanity. Example tax rates vs tax revenue and how the sweet spot for highest tax revenue possible is not necessarily higher tax rates but a higher GDP. Explain why revenue has a hard time getting much higher than 17 percent of GDP. Explain how 17 percent of trillions is better than 17 percent of billions for our tax revenue.

[LuigiMordelAlaume]

That assumption in economics that everyone is a "rational consumer" is a very questionable foundation for a lot of our monetary policy and other economic theories.

Yes, many people may consider the time value of money when making a purchase, but the vast majority of consumers don't even know inflation beyond what gas prices are doing.

Inflation is the hamster wheel that keeps the non-elites struggling.

It's a little conspiratorial (no this isn't an antisemitic globalist Jewish banker thing), but I'm pretty sure someone in history rationalized inflation by talking about how debtors' loans will become easier to pay with inflation, because the explanation presumes the money just flows to everyone equally.

But in reality, inflation makes it necessary to fight for higher wages and this is a perpetual distraction. It forces people to work more just to tread water.

Imagine a fixed money supply where every price is basically locked in forever. Maybe slight swings when one-time costs vary, and higher costs can still be used to fund innovation, but you never have to worry about slowly drowning.

[tokoloshe]

I like the channel but this topic isn’t really personal finance. It’s macroeconomics