Is inflation inevitable in all successful economies? Throughout history, has there ever been a society that maintained 0% inflation for a long term while still maintaining a good quality of life?


Is inflation inevitable in all successful economies? Throughout history, has there ever been a society that maintained 0% inflation for a long term while still maintaining a good quality of life?

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Typical economic policy deliberately keeps a slight rate of inflation.

The reason is that economies are more active when capital (money available for investment) is being actively invested in building up the economy than when it’s being saved in a bank account or a bunch of gold bars somewhere or whatever. In an inflationary environment, people with money are encouraged to invest it, because it will slowly become less valuable if they hold onto it. That produces economic growth, which most governments are trying to encourage. In a *de*flationary environment, on the other hand, people with money are encouraged to hoard it, because it’s becoming *more* valuable over time.

It’s not that you *can’t* avoid inflation, it’s that you don’t want to. (Of course, *too much* inflation is also bad, but that’s another matter.)

To answer that question you need to understand what inflation is exactly. Currency and Wealth are two different things. Wealth is stuff of value for human, either a product, a natural resource or a service. Currency is just something that help trade wealth. There is a relationship of supply and demand between the two.

The supply is the currency and the demand is the wealth, because the more wealth you have the more you want to trade it with others. In general, wealth increase over time. The population increase so more worker, the technology and education increase so we are more productive, etc.

So this mean that if demand (wealth) increase, but the supply (currency) stay the same, then the value of the currency will increase, which would be deflation. But if we add currency to the economy faster than the wealth increase, then we get more supply than demand, which lead to a decrease in the value of the supply (currency), we call that inflation.

So as a country you can decide how much currency you want to add to the economy to control like a valve how much deflation or inflation you want. But unlike a valve, this is a very complex and dynamic problem. You can try to estimate how much wealth will increase, but you will never estimate exactly. You also can’t simply add an exact amount of currency in the economy, you need to add it indirectly (too complicated to explain here).

So even if you wanted to stay at 0% inflation, that would just be impossible. So usually countries try to target about 2% inflation. That way with natural variation you should vary between 0 and 4% inflation, which are all relatively healthy level of inflation. You don’t want to go into deflation long term or too high of an inflation.

The other advantage of targeting 2% is that a little bit of inflation is actually good. It incentivize people to invest their money instead of keeping it. Money invested is money that do work and that’s good for economic growth.

So no it would be physically impossible to keep your inflation at 0%, but even if it was possible that wouldn’t be good for economic growth.

Judging by modern standards of what a “good quality of life” is, our societies today are the only examples that have ever existed

Inflation is inevitable in a *growing* economy. Inflation should be used to describe an increasing money supply, but layman usage has incorporated any increase in price into the definition which makes it harder to use. Price can go up and down because of supply vs demand, but that shouldn’t be called inflation. Price that goes up because of increasing money supply is inflation. M1, M2, and all these other designations are to show money supply that increases because you need more money in circulation to support a (supposedly) growing economy where new industries are entering the system, old ones are growing bigger, etc. Quality of life depends on time, place, and the social policies of a given society. And *whose* QOL we’re talking about here. Rich people? Working people? Domestically? Abroad? Money supply could also be going up because… Bankers (by which I mean the Federal Reserve). Wall Street. Shenanigans. Shady shit that media will explain to people so they understand the situation the “proper” way.

Is a stagnant economy that bad? Only if you’re a capitalist system that *must* grow and return a profit or else fall apart because literally no alternative. Capitalism is fundamentally unsustainable because resources are finite. Once you’ve captured every natural resource for profit, the only other resource left is other people. That’s why capitalism is also inherently imperialistic. If country A trades $100 worth of goods with country B, no one gained more. If country A enslaves country B, it’s all profit for A (minus investment in war). Nowadays, it’s economic warfare, geopolitics, alliances, trade wars. But if you’re the world’s leading military power with all the tech, nukes, and capital influence, you get what you want. And by “you” I mean the wealthy, obviously.

Well, inflation is a fairly arbitrary measure of a phenomenon that isn’t that well understood and has only really been studied in certain kinds of societies, so it’s hard to make any general statements about what might be possible.

Inflation is usually measured by comparing the price in a given currency of a given basket of goods over time. Currencies can work in all kinds of different ways, and the choice of basket of goods is somewhat arbitrary, so who knows what’s possible? For example, you could imagine a highly segmented society in which there isn’t really a meaningful overall inflation rate, but instead different rates in different parts of the society.

All we can really say is that, in contemporary capitalist societies, both deflation and very high inflation tend to be associated with economic problems. But we don’t really know which direction the causality goes in, and a recurring problem with economics is that our understanding of the economy feeds back into the economy, leading to self-fulfilling prophecies. For example, maybe the reason why economies with 2% inflation tend to do well is because everyone believes they will do well, leading to increased investment and confidence.