Everything Is Bad

I've often wondered why we target a certain percentage of inflation and think of it as normal and good.

The official goal is 2%, in case you're wondering.

The reason they are doing this is to prevent deflation.

Why is that?  If you ask most people they'd be happy with lower prices on goods.

The answer is historical.  The great depression had massive deflation as prices dropped to get any return on investment at all.  Because prices were falling, people deferred purchases, lowering demand in the face of sufficient supply and caused prices to fall further...  Until prices were well below costs and the company closed.

It's a vicious thing.

I am willing to bet that, if we looked into it, we'd find that people stopped buying goods they didn't NEED because they'd lost jobs and had reduced incomes from the recession that became the great depression.  Deflation USED to be how the economy righted itself in the face of recession.  For some reason (cough cough cough FDR) it failed that time.  One reason was how easy it was to obtain credit (credit is another word for debt in case you're not up to speed here) and deflation kills you if you owe.

Inflation causes people to defer a purchase when their wages stubbornly refuse to keep up with inflation.

You might notice a lack of LS3 cam in The Beast?  That's because we're buying groceries.  The cam purchase is deferred.

Explain again why deflation is bad?

Worse, we can tell that they're lying about it because of how selective they get when calculating inflation.  They don't count "volatile" goods like energy and food.

You know, the stuff that everyone HAS to buy and cannot readily be deferred.

Those goods are crushing us.

My, long held, theory is that inflation is good for people in debt.  Economists LOVE debt.

If we take the official inflation rate against my house payment...

The $458.61 I've been paying on my mortgage every month was $458.61 when I started.  You need $765.49 today to match the buying power of $458.61 then.  Put the other way, our payment has fallen to the equivalent of $274.76 over the past 20 years.

Inflation is GREAT if you're in debt.  My loan is getting cheaper the longer inflation goes on.

What entity is in the most debt in America today?

Personally I'm good with 0% inflation.  I can afford what I have and knowing that it won't be getting more expensive to keep it on an unpredictable schedule would be GOOD for me, even with my meager debts.

Some deflation would also be good for me.  Especially if wages hold firm.

I think I know who benefits from the Fed's scheme, and it's not The People.