Is Inflation Necessary - page 3. | Bitcointalksearch.org

serjent05

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Low inflation is necessary because it makes the economy move. Just like the earlier reply stated, without inflation the economy will become stagnant. Low inflation can make a country more stable because they can take advantage of the positive impact such as:

Quote from: https://www.toppr.com/guides/fundamentals-of-economics-and-management/money/impacts-of-inflation/

Answer: Inflation favourably impacts the economy in the following ways:

Higher Profits since producers can sell at higher prices
Better Investment Returns since investors and entrepreneurs receive incentives for investing in productive activities
Increase in Production
More Employment and Better Income
Shareholders can earn a good income since companies book more profits and tend to share it with their shareholders via dividends
Benefits to Borrowers – The real value of the money returned is less than that of the money borrowed

High inflation is not necessary because it can destroy the economy of a country and forces the government to print more money due to the shortage of resources to pay for the ever-increasing price of the material for government projects. Even though this high inflation is not necessary, it often occurs due to lax monetary policy[1].

[1] https://www.imf.org/en/Publications/fandd/issues/Series/Back-to-Basics/Inflation

Nwada001

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Quote from: franky1 on April 26, 2024, 04:35:10 AM

Quote from: pooya87 on April 25, 2024, 11:19:58 PM

Quote from: franky1 on April 25, 2024, 07:41:49 PM

a. population increase
if more currency didnt get printed, generation growth would happen but each person would have less cash each

You are confusing supply and demand with inflation.
Printing money (increasing fiat supply) doesn't automatically mean inflation. Where that printed money goes can lead to inflation. They also don't print it based on population, they print money (or should print money) based on demand which could be simply referred to as the "production capacity".

But in reality they print money to cover their budget deficits which doesn't go into production so it causes inflation. For example US doesn't print $1 trillion every 100 days because US population is suddenly growing, or the US economy is growing. Neither one of these are happening. What is happening is a massive budget deficit that they have to cover by printing that much money.

you got things completely the wrong way round

populations grow first and naturally so
this then causes demand which needs a supply to meet demand (even before productivity)
good inflation would stay at 2% IF money printing matched population growth and its economic productivity rate

however when they aimlessly over print more than the rate of population+REAL productivity.. that then makes businesses see an influx of too much cash so they raise their price and thats when inflation turns bad

Among every other factor that contributes to inflation growth, I strongly believe overprinting of money by CBN increases the supply in the market, and when the supply in the market is too high, it will in turn decrease the value of the money that is in circulation, and purchasing power will reduce.

One of the things I believe contributes to the high inflation we are facing in the world economy today is the nonstop printing of local currency by the various central banks of each country. They are gradually devaluing the currency through that action.

When the currency in the market is higher than what the citizens demand, it will only result in a high price of goods, which means using more money to buy goods you could get with less currency before due to the low value each of those currencies possesses.

Mame89

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Quote from: alastantiger on April 25, 2024, 04:31:49 PM

The bitcointalk forum is comprised of diverse people from all over the world. Our countries' must have gone through inflation as a nation at least once or more since its history. As a refresher, inflation happens when the prices of goods and services rise and people can no longer afford those items because the country's money almost becomes useless. But is inflation needed? Why can't we just keep the currency at the same value? And why does it only happen to money? For example, the same wouldn't happen if we used gold as a currency instead. Is inflation a ploy that the government uses so people don't get rich off of savings?

In my opinion, yes. Because inflation is the government's way of taking our money, because with every inflation our money decreases in value. As long as there are countries or anything that owes money to the IMF/World Bank, inflation will continue to exist until it reaches its worst point, now the debt of all countries in the world is very large and impossible to pay off.

The situation will improve if the world bank will forgive the debts of all countries or there will be a major reset and maybe there will be a new currency that replaces paper money. The whole world has been trapped in this chaotic system and will not be able to get out, and some of the rich people in this world are just a speck of dust compared to the people behind this system, because they can create a future world crisis in just a matter of hours which results in inflation.

Y3shot

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Quote from: alastantiger on April 25, 2024, 04:31:49 PM

The bitcointalk forum is comprised of diverse people from all over the world. Our countries' must have gone through inflation as a nation at least once or more since its history. As a refresher, inflation happens when the prices of goods and services rise and people can no longer afford those items because the country's money almost becomes useless. But is inflation needed? Why can't we just keep the currency at the same value? And why does it only happen to money? For example, the same wouldn't happen if we used gold as a currency instead. Is inflation a ploy that the government uses so people don't get rich off of savings?

Inflation will always be their as far as a country depends on other countries in one way or the other. Their will be nothing like inflation if every have everything and nothing like trading with other countries. Even if your country is a country that has everything you still need to trade the products that your country has and completion in the market can also lead to inflation too. Their are so many factors that the cause of inflation. I think inflation is part of humanity that we can't do without. Every country having a different economy is also a reason why inflation exist.

Cryptoprincess101

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Quote from: alastantiger on April 25, 2024, 04:31:49 PM

The bitcointalk forum is comprised of diverse people from all over the world. Our countries' must have gone through inflation as a nation at least once or more since its history. As a refresher, inflation happens when the prices of goods and services rise and people can no longer afford those items because the country's money almost becomes useless. But is inflation needed? Why can't we just keep the currency at the same value? And why does it only happen to money? For example, the same wouldn't happen if we used gold as a currency instead. Is inflation a ploy that the government uses so people don't get rich off of savings?

Almost every country experiences inflation at some time then later on they bounce back but it mostly happens to countries that have good economic system just that at some point due to mismanagement of the country's Treasury by a particular government and continuous importation of foreign products may lead to inflation because as they are patronizing foreign products that's how they are giving more value to that country's currency. Just like the question you asked, it has always been the problem because sometimes a country's currency depreciates and also appreciates can't this currencies just be at a stabilize value? This is the more reason why we should embrace Bitcoin because it will be the end to inflation.

Ultegra134

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Quote from: DeathAngel on April 26, 2024, 09:44:52 AM

Inflation is necessary to maintain a healthy & stable economy. It encourages spending & investment by reducing the value of money over time. This stimulates economic growth & prevents stagnation. Inflation also allows for adjustments in wages & prices ensuring that they remain in line with changing market conditions. A moderate level of inflation can help to reduce the burden of debt & encourage borrowing which can be beneficial for individuals & businesses. Excessive inflation though can be detrimental leading to uncertainty & erosion of purchasing power. It’s important to strike a balance & maintain controlled inflation. We are here on a Bitcoin forum though, we know the antidote for inflation & loss of purchasing power, i.e. buy Bitcoin.

I think this is the best definition given in this thread so far! As someone who has studied economics and the principles of inflation, I can confirm that a minor increase of 1% to 2% per year is healthy and contributes to the economy, showing signs of growth.

People, including the OP in this case, are often portraying inflation as something negative; this is true when it gets out of hand. The economy became stagnant during COVID-19 due to quarantine measures and was then abruptly met with increasing energy prices that occurred before the Ukrainian-RRussian war broke out. It quickly became a vicious cycle, and inflation has now tremendously increased while salaries have seen no major improvement.

Woodie

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Quote

Re: Is Inflation Necessary

In a normal world I don't think we can say it's necessary...

Otherwise you know how they say one man's food is another man's poison...I guess the same theory can apply here because when consumer's are complaining about how money has lost its value, the manufacturer and merchants here will be the main beneficiaries as even the old stock that was valued for less will gain without any value addition which shows there is a winner in this after all.

martinex

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I look more at the smallest object, inflations makes many people whose economy is the lower middle class suffer, especially those who live a day of work only enough for a day's needs even if it goes well. But from their point of view business people are good and inflation drives economic growth in normal quotes.

About why it should go to fiat instead of gold, I think in naming and instrument, it is different, especially if we look at the value factor and why it often happens, only one reason they always convey to the public, maintain price stability and achieve balanced economic growth and the government always wins.

kryptqnick

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Inflation being important is more of a hypothesis, from what I understand, and it's based on the idea that a gradual loss of value of fiat is supposed to motivate people to spend it instead of hoarding it. Too much inflation, is of course, a bad thing, because it often means that your purchasing power gets lower. Major growth in value, I believe, can also be a bad thing, because, as we see with Bitcoin, when something's growing, people treat it more as an asset than as a currency.
But I think that zero inflation should be okay, as well as minor annual deflation. I mean, Japan has been doing pretty well with decades of mild deflation.

Catenaccio

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Quote from: DeathAngel on April 26, 2024, 09:44:52 AM

Inflation is necessary to maintain a healthy & stable economy. It encourages spending & investment by reducing the value of money over time. This stimulates economic growth & prevents stagnation. Inflation also allows for adjustments in wages & prices ensuring that they remain in line with changing market conditions.

Creating inflation is like opening a Pandora box that is non stop and I agree with you that it stimulate spendings, economic growth, prevent stagnation but I disagree with you that it creates healthy and stable economy.

It has opposite effects and negative ones are creating chaos in their economy and many banks, companies can collapse as consequence of inflation and policy changes from governments and central banks. If inflation is helpful for a healthy and stable economy, no one will worry and be fearful about inflation.

DeathAngel

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Inflation is necessary to maintain a healthy & stable economy. It encourages spending & investment by reducing the value of money over time. This stimulates economic growth & prevents stagnation. Inflation also allows for adjustments in wages & prices ensuring that they remain in line with changing market conditions. A moderate level of inflation can help to reduce the burden of debt & encourage borrowing which can be beneficial for individuals & businesses. Excessive inflation though can be detrimental leading to uncertainty & erosion of purchasing power. It’s important to strike a balance & maintain controlled inflation. We are here on a Bitcoin forum though, we know the antidote for inflation & loss of purchasing power, i.e. buy Bitcoin.

Gozie51

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There is one common and agreeable necessity of inflation in the economy. By simple explanation, inflation is when the value of money is lesser than the cost of product and that can lead to increase in demand. Therefore, one benefit of inflation is that it can lead to increase in production if properly planned and that means there should be employment because of the production and manufacturing purposes.

Another benefit is that it can be used to control the circulation of money in the system. An economy that is experiencing inflation means they have low value of money in the system or the money is not used irrationally as everyone goes to money management.

franky1

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Quote from: pooya87 on April 25, 2024, 11:19:58 PM

Quote from: franky1 on April 25, 2024, 07:41:49 PM

a. population increase
if more currency didnt get printed, generation growth would happen but each person would have less cash each

You are confusing supply and demand with inflation.
Printing money (increasing fiat supply) doesn't automatically mean inflation. Where that printed money goes can lead to inflation. They also don't print it based on population, they print money (or should print money) based on demand which could be simply referred to as the "production capacity".

But in reality they print money to cover their budget deficits which doesn't go into production so it causes inflation. For example US doesn't print $1 trillion every 100 days because US population is suddenly growing, or the US economy is growing. Neither one of these are happening. What is happening is a massive budget deficit that they have to cover by printing that much money.

you got things completely the wrong way round

populations grow first and naturally so
this then causes demand which needs a supply to meet demand (even before productivity)
good inflation would stay at 2% IF money printing matched population growth and its economic productivity rate

however when they aimlessly over print more than the rate of population+REAL productivity.. that then makes businesses see an influx of too much cash so they raise their price and thats when inflation turns bad

Uhwuchukwu53

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Quote from: alastantiger on April 25, 2024, 04:31:49 PM

The bitcointalk forum is comprised of diverse people from all over the world. Our countries' must have gone through inflation as a nation at least once or more since its history. As a refresher, inflation happens when the prices of goods and services rise and people can no longer afford those items because the country's money almost becomes useless. But is inflation needed? Why can't we just keep the currency at the same value? And why does it only happen to money? For example, the same wouldn't happen if we used gold as a currency instead. Is inflation a ploy that the government uses so people don't get rich off of savings?

I don't naturally see this as result of government trying to mortgage it's citizens or control citizens with the use of inflation but as long as demand and supply remains inflation must be unquantifiable situation, the facts remain that the more the government introduce or adopt New currency as legal tender the more it create some issue value fall if the the current currency previously adopted.

Iranus

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Quote from: Zaguru12 on April 25, 2024, 05:24:53 PM

Quote from: alastantiger on April 25, 2024, 04:31:49 PM

As a refresher, inflation happens when the prices of goods and services rise and people can no longer afford those items because the country's money almost becomes useless. But is inflation needed?

Inflation doesn’t necessarily mean that the country currency is devaluing but also comes in such a way that the demand for a product or service is way higher than the demand and such people pay higher to get the product. There are other reasons for inflation. Now concerning your the devaluation rate of money as a cause of inflation I think the government can easily afford to make their currency stronger by either reducing the supply of the currency printing or even increase the production and exportation of goods outside the country using the currency as an exchange currency.

The explanation is very good and very convincing. Most people just blame the government and think it's because they print money uncontrollably. Most people just blame the government and think that the reason is because they print money in an uncontrolled way, but what people don't know is that with rapid population growth as well as balancing supply and demand, something that is almost impossible to control. This will also cause inflation, not the main cause being the Government printing money indiscriminately. The world population is up to 8 billion people, each country has different economic policies, so inflation is unavoidable.

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Quote from: alastantiger on April 25, 2024, 04:31:49 PM

The bitcointalk forum is comprised of diverse people from all over the world. Our countries' must have gone through inflation as a nation at least once or more since its history. As a refresher, inflation happens when the prices of goods and services rise and people can no longer afford those items because the country's money almost becomes useless. But is inflation needed? Why can't we just keep the currency at the same value? And why does it only happen to money? For example, the same wouldn't happen if we used gold as a currency instead. Is inflation a ploy that the government uses so people don't get rich off of savings?

The actual reason for inflation is when government prints more money so the purchasing power of your fiat depletes thus resulting in value of goods and services increase. Rich people says inflation is good because they're the one borrow the most and when inflation hits harder it gives opportunity for them to pay the debt easier.

We moved from gold based monetary system a long way back and there is no point of comparing it now.

davis196

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Quote from: alastantiger on April 25, 2024, 04:31:49 PM

The bitcointalk forum is comprised of diverse people from all over the world. Our countries' must have gone through inflation as a nation at least once or more since its history. As a refresher, inflation happens when the prices of goods and services rise and people can no longer afford those items because the country's money almost becomes useless. But is inflation needed? Why can't we just keep the currency at the same value? And why does it only happen to money? For example, the same wouldn't happen if we used gold as a currency instead. Is inflation a ploy that the government uses so people don't get rich off of savings?

The richest countries around the world have the biggest national debts. They have to print more money(dollars, euro, etc.) to pay their debts.
Imagine what will happen if the richest countries stop with the money printing and they don't have enough money to pay their debts.
A global default would most likely put and end to inflation, but it will cause a new Great Depression, with massive waves of companies and banks going bankrupt and millions of people losing their jobs. With that being said, I think that inflation has become kinda necessary for the rich countries.

Alpha Marine

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Saying inflation is a manipulation from the government is not entirely true. In a free market, demand and supply determines price. If the demand is high, the price will increase. Also the cost of production also determines the price.

Inflation is not totally a bad thing, it's when the inflation becomes too much that becomes a problem. It doesn't totally mean the value of the currency becomes useless. Inflation becomes a problem when the rate of inflation is high within a period. For example, if inflation in a country increases by 3% within a year it becomes a problem, but if it increases by 3% within 5 years then it can be favourable for the economy.

When there's a 2-3% inflation in 5 years, it beneficial to the economy in the sense that the producer's profit will increase. This can also affect the investment returns of investors because their returns will increase.
There will also be higher production and to do that businesses may need more employees which would then improve employment.

The lack of inflation in Japan was a problem (don't know if it still is). I read a report sometime that people wouldn't buy a product if there was a $2 increase in Japan and this took its toll on the economy.

Learn Bitcoin

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No matter if we want it or not, inflation will be there. You should not question if it's necessary or not. Haven't you heard about countries like Zimbabwe and the worst decisions of their country? Their Prime minister thought they would print money they will pay the debt to all the countries and build the country by printing money. A county must follow some rules when they print money. They have to think about their foreign reserves as well. It depends on many other things that I am not aware of.

Apocollapse

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Quote from: pooya87 on April 25, 2024, 11:19:58 PM

Why is it like this? Because economy as a science is wrong. What they teach kids in schools, universities, etc. is wrong. Which means the economy that rules the world is built on top of flawed sciences hence it works like this, where the so called "experts" believe that inflation is a good thing.

They say inflation is a good thing because the more people believe it, the more money they i.e. government can earn.

Banks makes money from lending, custodian and fees, they need to print new money in order their lending service can work. In other hands, they offer custodian service i.e. savings, many people think they can get benefit over banks protect their money and they will earn from that small % APY. But actually the inflation rate is way more higher than the interest rate, which make them in loss instead of profit.

So, either you ask a loan or save your money, you're in loss.

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