This is a common belief but wrong. History shows that inflation can occur when there is a flight from the currency. High employment and high consumer spending are not necessary requirements. If the loss of faith in the currency outpaces the unwillingness to pay higher prices, then people will grudgingly pay higher and higher prices - fleeing paper currency in exchange for real goods. Hence, inflation. When that gets out of control, you get hyperinflation.
INFLATION AT 2% WILL DOUBLE PRICES IN JUST 35 YEARS YEAR 1,000.00 2% 100% 1,020.00 1 1,020.00 2% 100% 1,040.40 2 1,040.40 2% 100% 1,061.21 3 1,061.21 2% 100% 1,082.43 4 1,082.43 2% 100% 1,104.08 5 1,104.08 2% 100% 1,126.16 6 1,126.16 2% 100% 1,148.69 7 1,148.69 2% 100% 1,171.66 8 1,171.66 2% 100% 1,195.09 9 1,195.09 2% 100% 1,218.99 10 1,218.99 2% 100% 1,243.37 11 1,243.37 2% 100% 1,268.24 12 1,268.24 2% 100% 1,293.61 13 1,293.61 2% 100% 1,319.48 14 1,319.48 2% 100% 1,345.87 15 1,345.87 2% 100% 1,372.79 16 1,372.79 2% 100% 1,400.24 17 1,400.24 2% 100% 1,428.25 18 1,428.25 2% 100% 1,456.81 19 1,456.81 2% 100% 1,485.95 20 1,485.95 2% 100% 1,515.67 21 1,515.67 2% 100% 1,545.98 22 1,545.98 2% 100% 1,576.90 23 1,576.90 2% 100% 1,608.44 24 1,608.44 2% 100% 1,640.61 25 1,640.61 2% 100% 1,673.42 26 1,673.42 2% 100% 1,706.89 27 1,706.89 2% 100% 1,741.02 28 1,741.02 2% 100% 1,775.84 29 1,775.84 2% 100% 1,811.36 30 1,811.36 2% 100% 1,847.59 31 1,847.59 2% 100% 1,884.54 32 1,884.54 2% 100% 1,922.23 33 1,922.23 2% 100% 1,960.68 34 1,960.68 2% 100% 1,999.89 35 1,999.89 2% 100% 2,039.89 INFLATION AT 3% WILL DOUBLE PRICES IN JUST 23 YEARS YEAR 1,000.00 3% 100% 1,030.00 1 1,030.00 3% 100% 1,060.90 2 1,060.90 3% 100% 1,092.73 3 1,092.73 3% 100% 1,125.51 4 1,125.51 3% 100% 1,159.27 5 1,159.27 3% 100% 1,194.05 6 1,194.05 3% 100% 1,229.87 7 1,229.87 3% 100% 1,266.77 8 1,266.77 3% 100% 1,304.77 9 1,304.77 3% 100% 1,343.92 10 1,343.92 3% 100% 1,384.23 11 1,384.23 3% 100% 1,425.76 12 1,425.76 3% 100% 1,468.53 13 1,468.53 3% 100% 1,512.59 14 1,512.59 3% 100% 1,557.97 15 1,557.97 3% 100% 1,604.71 16 1,604.71 3% 100% 1,652.85 17 1,652.85 3% 100% 1,702.43 18 1,702.43 3% 100% 1,753.51 19 1,753.51 3% 100% 1,806.11 20 1,806.11 3% 100% 1,860.29 21 1,860.29 3% 100% 1,916.10 22 1,916.10 3% 100% 1,973.59 23 1,973.59 3% 100% 2,032.79 24 2,032.79 3% 100% 2,093.78 THINK AGAIN ABOUT INFLATION AND THE GOOD JOB OF CENTRAL BANKS
You guys are missing key wording in my statement, "Inflation ONLY WORKS". I was refering to inflating your way out of debt as a previous poster had stated, and have an economy that survives.
in my experience with hyperinflation M2 is not relevant as in hyperinflation environment credit will contract and economy will move to cash as M0 easiliy outpaces what was M2 several months before that. I think if banks collapse and US government will start provide direct handouts to people the same might happen here
Exactly. And when lenders get repaid in inflated currency, they have that much less to lend in the future which is not good for an economy based on perpetually rolling debt. The lenders that really get screwed are those that borrowed at variable rates or borrowed short-term but lent at low fixed rates for the long-term. They'll be stuck with assets paying squat and having to pay or roll debt in a high rate environment. This includes some institutions holding mortgage debt which their models said would get prepaid by refis, flips, and normal home sales. But a lot of home owners are now trapped in their current mortgage and will probably keep their mortgages for much longer than the banks expect. Price instability such as inflation is really damaging to the economy even if it means some debtors get some relief.