> Greece has deflation and Japan is very close to deflation. Are those countries examples to look up to? I don't think so.
As though the defining characteristic of those two countries is near deflation. Under the veil of ignorance I would choose to live in a low/deflationary country than a high inflation country. Every single time
> Inflation is an incentive to invest your money, as otherwise it would sit in your bank account and do nothing except cause unemployment, which causes the productivity of the country to go down.
What about those that are living paycheck to paycheck? What about those that are retired or near retirement?
> As inflation is a percentage it affects people proportional to their savings, billionaires lose the most and are forced to invest their money for the benefit of the rest of the economy.
According to the IMF and world bank this is wrong. Just look at countries that have high inflation. Inflation hurts the poor the most
IMF: High inflation tends to lower the share of the bottom quintile and the real minimum wage -and tends to increase poverty
> Under the veil of ignorance I would choose to live in a low/deflationary country than a high inflation country
Well, few people would disagree with you that high inflation is bad.
Between steady low inflation and deflation though, there's problems with deflation related to the fact that it's hard for the interest rate to go below zero (since people can just put money in their mattress to get a zero return).
Basically, the Fed lowers the interest rate to limit recessions (and raises it to fight inflation). But what really matters is the real (inflation adjusted) interest rate.
If the Fed cuts interest rates to zero, but deflation is 3%/yr, that raises the real interest rate to 3%. And raising the interest rate is itself deflationary, so I'm sure you can see the problem with this - it's a positive feedback loop. Deflation raises the real interest rate leading to more deflation, less investment, more loan defaults, etc. That's the classic deflationary depression spiral that often ends in massive, rapid currency debasement and/or political instability.
Because that's so undesirable (and historically the currency ends up debased anyway after a lot of chaos) there's an argument for targeting a small, but positive, amount of inflation every year just to be on the safe side.
As though the defining characteristic of those two countries is near deflation. Under the veil of ignorance I would choose to live in a low/deflationary country than a high inflation country. Every single time
> Inflation is an incentive to invest your money, as otherwise it would sit in your bank account and do nothing except cause unemployment, which causes the productivity of the country to go down.
What about those that are living paycheck to paycheck? What about those that are retired or near retirement?
> As inflation is a percentage it affects people proportional to their savings, billionaires lose the most and are forced to invest their money for the benefit of the rest of the economy.
According to the IMF and world bank this is wrong. Just look at countries that have high inflation. Inflation hurts the poor the most
IMF: High inflation tends to lower the share of the bottom quintile and the real minimum wage -and tends to increase poverty
https://openknowledge.worldbank.org/bitstream/handle/10986/1...