Ummm. Inflation is NEVER good for LENDERS. That is what I said. Inflation is good for borrowers. Your link proves that point well. When inflation rises, interest rates also rise usually. People then remove money from 2% saings accounts and invest in bonds and T-bills for more than double the rate of return for no increased risk. Banks are now locked into 30-year mortgages that are making relatively less money for them each year. Eventually it gets bad enough that the government uses taxpayer money to bail them out. But in the end, borrowers benefited. The OP's question was whether inflation was ever a good thing. In relation to "deflation" it is a very good thing.
In the long run inflation isn't good for borrowers, either. It may appear to be so when the focus is on "nominal" values. And sometimes certain investors may, for a short time, increase their assets relatively greater than the decrease in buying power of inflation and currency debasement. However, as the financial environment of inflation goes parabolic in the end, virtually nobody can "keep up". Ultimately, inflation and currency debasements are KILLERS to 99% of the populace.
I don't 100% disagree with you, but you make one assumption that I think is incorrect. You assume that eventually inflation must go parabolic. It is true that inflation might go parabolic, but it doesn't have to. Inflation is a KILLER to savers and investors in anything that doesn't carry a real return of >0%. Inflation that is consistently around 2-3% is very manageable by savers and good for borrowers, without causing a crippling of the financial industry. Market forces might bring inflation up for a short period, but whenever it does, there is always a correction. Also, I'm not focussing on nominal values. A decreasing debt ratio for borrowers is always better than an involuntary increase in debt ratio. Even if their money is worth less in terms of daily purchases. Borrowers are helped by inflation, plain and simple.
On a different vein, I'm tired of hearing people talk about pay not keeping up with inflation simply because food and energy prices are inflating rapidly. I always hear that real inflation is around 8%. It is then assumed that people's pay should increase 8% to even it out. This is not the case in my mind. A company should not feel obligated to match inflation increases for discretionary income. They should provide cost-of-living increases. My living expenses only consume about 25% of my net income. Even if prices across the board have increased 10%, I only need a 2.5% raise to make it a wash. It is up to me to invest my discretionary income in such a way as to protect its value.
You're smarter than that. Under the current central bank system, which exists in every other 1st world country (except maybe Japan), the government HAS NO POWER over the money. PERIOD. At best, they can create a dog & pony show for the masses and try to appease the Fed. And work the stats. Debasement requires that the government (really the king in those times) has full control over the money. As for ongoing borrowing by the government, there is no other way. It's impossible to stop unless you want to crash the whole system, the wrong way. There is nothing wrong with attacking the establishment, but you have to know your history, the fact and understand all sides of the equation. If you honestly believe: 1) The government prints money 2) Greenspan or Bernarke have any real power 3) The president or Congress have any power over money supply, interest rate, etc. 4) Government can stop borrowing at any time, they just choose not to 5) The Fed system is unique from the rest of the 1st world You are still in the dark.
Well said. There've been many times throughout the last 100 years that the G-ment has been frustrated with the FED because the FED won't accomodate political agendas. And visa-versa. There are also times when the FED has scraped and clawed to stop inflation with no success. As the saying goes, "You're entitled to your own opinions, but you're not entitled to your own facts."
Besides hyperinflation, this latest kind is the scariest: wages basically flat with inflation eating away disposable income. And all underreported in my opinion...
Yes inflation is a very good thing in a stable market. In an unstable market it is not a good. For instance take a market that has price controls. This type of inflation is not good since the price can keep going up for no reason.
That may be true but as a defato standard the people follow so it is rule. The Fed can have an effect on inflation and the government uses the Fed and the Fed is part of the department of treasury. http://en.wikipedia.org/wiki/Federal_Reserve