June 19, 2019

Carlson: Why do we need inflation

Ben Carlson–A Wealth of Common Sense:
I get the idea behind being against inflation. Why would people want to see prices rise over time? Wouldn't people benefit from lower or stable prices? 
In theory, this seems rational but theory rarely works in the real world. In the real world, the economy operates based on expectations. And, right or wrong, inflation and deflation bring about a very different set of expectations about the future, which can subsequently impact the present.
Carlson's lucid answer to an elemental question in personal finance and investing; better a little of the bad than a lot of the worse. Think of the Fed's 2% core inflation target as a buffer between affordability and disaster.

#investing #personalFinance #inflation