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.
My take was just that banks know this “trick” and prevent it one way or another or they’d go broke.
What trick? It’s just a fact about how debt works.
The bank makes more from the interest than they lose from inflation. If inflation is 2.6% and your debt is 5% then they’re making money. Just because the overall payment becomes a smaller part of your salary doesn’t mean that the bank loses money.
It’s literally just basic math.
Well you won’t game anyone with it is all l’m saying.