News that makes you say WTF! (16 Viewers)

Bjerknes

Bjerknes

"Top Economist"
#3,522
Mar 16, 2004
116,240
#3,522
Ocelot said:
Of course it's a zero sum game (at least in the short run), but that doesn't make it meaningless. It's a distributional policy. And unless the whole population is living on minumum wage and has no savings whatsoever, you'll never get an inflation increase that completely neutralises a raise in minimum wage.
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But why do we need inflation?
 
Ocelot

Ocelot

Midnight Marauder
#3,525
Jul 13, 2013
18,943
#3,525
Bjerknes said:
But why do we need inflation?
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I wouldn't say that inflation is needed per se, but that it is a by-product of other positive developments or policies. To relinquish these policies simply out of fear of inflation would be detrimental to a huge variety of other areas; employment, growth, etc. That's not to say that it can't have positive effects as well, such as providing incentives to spend and invest, but promoting inflation as an end in itself would in most situations be ridiculous. The dangers inflation poses however are very often simply exaggerated, it's only really a problem if wages don't rise adequately (as with minimum wagein the US) or it gets really out of bounds and hyperinflation ensues. What's far more damaging of course is deflation, which can ruin a whole economy and is very difficult to get out of once it has started to run its course.
 
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