Well you're seeing some obvious flaw that I'm not. How does 2% inflation stave off devastating effects on capitalism? Is it a velocity of money issue? Or is it a matter of all nations needing to devalue currency at the same rate to keep trade steady?
You can take a look at countries which are battling higher inflation rates like Turkey.
And you can take a look at countries which are battling deflation like Japan.
No one wants higher inflation rates (above 4% or higher), because like you said it's a tax on savings, especially on savings of the retired. In such scenarios banks have to limit their loan output, which leads to lower investments.
And no one wants deflation. Lower prices lead to lower revenue for companies. Lower revenues lead to layoffs and lower wages for workers. It would be great for anyone with huge amounts of savings, but it would be devastating for the majority of working people.
So the best way under capitalism is to have moderate inflation around 2%. That's low enough so it doesn't effect the savings of the retired on a massive scale.
Well you're seeing some obvious flaw that I'm not. How does 2% inflation stave off devastating effects on capitalism? Is it a velocity of money issue? Or is it a matter of all nations needing to devalue currency at the same rate to keep trade steady?
You can take a look at countries which are battling higher inflation rates like Turkey.
And you can take a look at countries which are battling deflation like Japan.
No one wants higher inflation rates (above 4% or higher), because like you said it's a tax on savings, especially on savings of the retired. In such scenarios banks have to limit their loan output, which leads to lower investments.
And no one wants deflation. Lower prices lead to lower revenue for companies. Lower revenues lead to layoffs and lower wages for workers. It would be great for anyone with huge amounts of savings, but it would be devastating for the majority of working people.
So the best way under capitalism is to have moderate inflation around 2%. That's low enough so it doesn't effect the savings of the retired on a massive scale.