How much inflation is to much?

SLUSK

This is a simple question, how much inflation is to much?
I think any inflation over 0% is to much since I think the destruction of purchasing power never can be a good thing. The way I see it inflation also distorts behavior and it encourages borrowing and consumption over savings.

What do you guys think, how much inflation is to much and how much is "healthy"?

Time Magazine

SLUSK wrote: »

This is a simple question, how much inflation is to much?

It's a simple question but, unfortunately, there isn't a simple answer.

As for what I think is healthy? Below, but close to, 2%

SLUSK

Time Magazine wrote: »

It's a simple question but, unfortunately, there isn't a simple answer.

As for what I think is healthy? Below, but close to, 2%

What inflation numbers do you prefer? "core CPI" where food and fuel has been excluded?

Time Magazine

SLUSK wrote: »

What inflation numbers do you prefer? "core CPI" where food and fuel has been excluded?

HICP.

silverharp

oh for the good old days:D Webster's Revised Unabridged Dictionary (1913 + 1828)

In*fla"tion (?), n. [L. inflatio: cf. F. inflation.
1. The act or process of inflating, or the state of being inflated, as with air or gas; distention; expansion; enlargement. Boyle.
2. The state of being puffed up, as with pride; conceit; vanity. B. Jonson.</I>
3.Undue expansion or increase, from overissue; -- said of currency. [U.S.]

Hasschu

A great deal of debate has gone on for centuries as to what is the optimum rate of inflation that will keep an economy growing streadily over long periods of time. The consensus as far I can discern is that less than 1% is sub optimal and less than 0% is disastrous. More than 3% is also not sustainable over lengthy periods. The great debate rages on in the range 1% to 3%. If national and personal debt is high nearer to 3% makes some sense. If prudence rules then closer to 1% is the ticket. There is a concept called the natural non inflating rate of unemployment which can range from 3% to 9% and is related to benefits such as the amount and length of unemployment benefits. A complex issue with at least a dozen answers per country.

nesf

Time Magazine wrote: »

It's a simple question but, unfortunately, there isn't a simple answer.

Like all the great science questions.

The inflation question is so very key to our society yet is so ill-understood outside of academic economics. It's really one of those things that needs to be explained in school, at least at a basic level.

silverharp

Productivity growth is deflationary but would be classed as a positive in economic terms. One issue I have is that for example if you had a model economy where private prices are dropping at -2% re above , State prices/services are rising at +4% and asset prices are rising at 10% , no alarm bells seem to go off as the official print will be a moderate 1% to2%?

SLUSK

Why are asset prices excluded from inflation numbers? Rapidly rising asset prices is a sign of inflation to me.

BESman

What exactly happens when an economy grows? Demand for goods and services rise, employment rises, incomes rise and therefore producers can charge higher prices for goods and services - is this the main cause of inflation in a steadily growing economy?

SLUSK

nesf wrote: »

Like all the great science questions.

eThe inflation question is so very key to our society yet is so ill-understood outside of academic economics. It's really one of those things that needs to be explained in school, at least at a basic level.

Oh great economist guy. Do tell me how much destruction of purchasing power is needed to keep the economy healthy and why do they never seem to include asset prices when they calculate inflation?

nesf

SLUSK wrote: »

Oh great economist guy. Do tell me how much destruction of purchasing power is needed to keep the economy healthy and why do they never seem to include asset prices when they calculate inflation?

Oh great and mighty troll pick a different target.

SLUSK

nesf wrote: »

Oh great and mighty troll pick a different target.

Why can't you answer a simple question? Since inflation essentially means the destruction of purchasing power I want to know how much destruction of purchasing power is necessary.

Why should it be economic policy to favour borrowing over saving? Because it really does not make sense to save any money when you have inflation, just borrow as much as you possibly can and let inflation eat away your mortgage.

Time Magazine

SLUSK wrote: »

Why can't you answer a simple question?

He can, he just won't. I'm not surprised.