So basically, the last word according to this post is, "some people think deflation is the devil, but other people think it's good. Let's ignore them both and just see what happens."
"Nefario" argues that governments love inflation. That is not the case. There's no such thing as the government. The U.S. Fed generally likes having just a little bit of inflation. Anyone who remembers the 1992 U.S. presidential campaign quite possibly remembers GHW Bush's irritation at Greenspan for doing too much to fight inflation at the expense of job creation.
Central banks are independent for this very reason: GHW Bush wanted to turn on the printing presses and inflate the economy's way out of the recession, while the Fed wanted to preserve the value of the dollar.
I don't think anyone's going to claim that the system is anywhere near perfect, especially given the events of the last few years, but I have no idea how anyone can run through some simple thought experiments and not come to the conclusion that a finite currency pool is lunacy.
Exactly.. In fact, I'd go even further and say that everyone who is not an economist or a nerd likes having just a little bit of inflation.
"Normal" people like going into their year-end review at work and getting that 2% cost of living increase. Or maybe they'll bitch that they didn't get it. Or they might even picket and protest if their union hasn't gotten this bonus in a few years. But they will absolutely not accept a situation where ever year their salary has to float around because it's tied to a fixed money supply that they don't understand.
Could you imagine this? "Hey great job this year, but the economy is really taking off, so we need to cut your salary a bit to make up for that! Trust us, you come out ahead because the cost of goods has gone down and you can buy more with less."
Gentle inflation means gentle rising salaries, spending money, and happy people. ANY deflation means decreasing salaries, hoarding money, and people freaking out.
