We read at globalfinancialdata.com, that “From the end of the Napoleonic Wars in 1815 until the start of World War II in 1914, there was no inflation in most countries.” This is an American society, which has gotten use to the persistence and the existence of inflation and of which its expressed monetary policy so formulated believes that an inflation rate of 2% is just about right; thereby representing something that is neither too hot, nor too cold, but instead is lukewarm, of which, then, clearly this government somehow believes that the absolute stability of its currency is either an impossible objective to achieve, or that our modern-day monetary system cannot risk even the possibility of deflation or both.
Just because this country, amongst most countries in the world today, suffers from some degree of inflation, does not mean that this is the way that it should be, or even what should be desired by governmental monetary policy. After all, if, for instance, the United States had no inflation, whatsoever, that would thereby indicate that everything that is measured by the dollar, would remain constant, and thereby knowing that a dollar today would be worth the same as a dollar tomorrow, business decisions, would be far more straightforward, with no real need for currency hedging. That is to say, a known future, is going to be superior to an unknown and an unknowable future, of which, for instance, the inflation rate may be far higher or far more volatile than expected, which thereby makes it far more difficult for people and businesses to know which side to bet on or even what the best strategy is to protect their assets.
So too, inflation, is in its very nature, is going to have winners and losers. Those that are always going to be on the losing side, is everyone and everything, that doesn’t properly comprehend that money that sits absolutely idle is going to invariably become worth ever less; which is a way of saying, that those that save money, but have difficulty finding somewhere safe to park that money, are going to see their worth in real terms, decline. On the other hand, those that are in debt, in which the debt is pegged to a fix rate, of which that rate is lower than the effective inflation rate, are going to find it far easier to pay back that debt than previously, because they are doing so with dollars which are essentially costing them less and less against the debt that they so incurred.
This thus signifies, that governments that have deficits, often find that inflation benefits them in the ease of paying back that debt, and businesses may just find that inflation benefits them too, especially when they are able to increase their price point for products so being sold, without correspondingly increasing per the real inflation rate the labor compensation of their employees. All of this basically signifies, that in any era of inflation, this typically means that the sophisticated and the connected are going to be in a better economic position as compared to all those that aren’t that sophisticated and are unconnected, because those that have a good read of inflation, are to a large degree, the masters of those that do not.