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Why is inflation bad?

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Pierre-Alexandre Crevaux posted on Sat, Aug 18 2012 12:14 PM

I keep reading articles about how the ways to prevent inflation and whu such and such is bad because it causes inflation (fiat paper money, fractional reserve banking, low interest rates, etc.) The one thing I don't understand, though, is why is inflation bad?

It's elementary, sure. But rare are the ones that address the subject over here. My personal idea is that inflation is bad because it decreases the purchasing power of savings, thus lowering the influence of savings on investments. Am I right? Is there anything else?

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If you check out The Ultimate Beginner meta-thread you can usually find some resources for any topic you're looking to learn about. For your question in particular, we actually had some recent threads:

Looking for feedback on this inflation video

-This video addresses your question exactly.


Inflation Robbery

-This thread is along the same lines.


This article might help as well.


Another good video is here:


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1. Simple answer: Because it is simply a form of wealth redistribution as to who gets the money first and it can cause a lot of uncertainty if it is too high. As money circulates throughout the economy all prices are pushed upwards, so if you get the money early, or you have something that a lot of people want to spend money on at that moment, then you're going to have a large increase in your real purchasing power. If you're in the opposite case and you get the new money late or you're working in goods that aren't sold very quickly, then all prices have risen relative to your income. If you're a firm then you're not going to like the fact that prices are fluctuating upwards rapidly, and so you're not going to invest, jobs and output will suffer.

2. Complex economic answer: ABCT. I'm not going to go through and explain that here.

At last those coming came and they never looked back With blinding stars in their eyes but all they saw was black...
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Its like the king that takes ur gold coins and puts other kinds of crappy metals to devalue your medium of exchange.

It benefits the rich. and damages the poor.


Because when the currency is inflated, it first goes to the government, big banks, rich people up top closest to the influence of the source of money printing (government), then it flows to us, the middle class, and poor.

While it is at the rich peoples hands, the prices have not adjusted for inflation yet, so the rich can basically cheat and buy anything they want. When it flows down to the middle class, and businesses, etc thats when the prices start rising and we find out that our money is worth a little less.

“Since people are concerned that ‘X’ will not be provided, ‘X’ will naturally be provided by those who are concerned by its absence."
"The sweetest of minds can harbor the harshest of men.”

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Awiz90 replied on Tue, Aug 21 2012 4:14 PM
Also, inflation tends to rise much faster than wages. Therefor if prices are rising 2% and your wages remain the same, you literally are paying a 'tax' on what you purchase. If prices falls 2% and your wages remain the same, then your much better off. You then have what is left over to either save, invest, or spend on other goods.
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