Economists generally consider inflation (in high levels) a bad thing for the economy.
But how exactly is inflation considered a net negative? How can it be considered unambiguously bad? My logic only shows that it can be a net neutral effect on the economy.
For instance, let’s say an apple is $100, and it rises to $200. If people hold cash, this is obviously bad for them. However, there are other people selling the apple for $200, so isn’t that good for them? Money isn’t disappearing. If price levels rise, the amount of people making more money should perfectly cancel out the amount of people who has lost purchasing power. Note that $200 is the equilibrium level, so it’s not like the sellers aren’t pricing the apple at its optimal (equilibrium) point .So while inflation is a polarizing effect, it is a net neutral effect overall.
Which brings me to — how can hyperinflation (or even inflation) even exist if it’s unambiguously harmful for the general population or the economy? Aren’t price levels an equilibrium point (the most beneficial point)? The reason why inflation won’t jump 10000x next year is because if it did, there would be no one to pay for the items. So the seller pushes the prices down to the equilibrium point.
So why is hyperinflation in Zimbabwe bad? If hyperinflation is truly bad (a NET negative) and it has eroded away the purchasing power of everyone, then no one would be able to buy goods, which would push the price levels back down to the most beneficial equilibrium point. But it isn't in Zimbabwe. The reason why price levels are only increasing is because there exists buyers to meet the continually rising prices. So which brings me to the conclusion that while inflation is a polarizing effect (very harmful for some people), it has a net neutral effect on the economy.
Obviously, none of what i said is true, so there are a lot of complicated factors at play that I don’t understand.
Submitted November 03, 2018 at 10:03PM by Boostafazoom https://ift.tt/2SHv2x4
