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Inflation is a necessary evil for the development of an economy. Inflation is unavoidable but it must be kept in control.

Inflation is NOT unavoidable. In fact, there have been several recent periods where deflation has occurred.

Inflation is generally a side-effect of a growth-based economy with a Fiat currency. Inflation itself can be caused by several factors: a too-fast expansion of the money supply, fluctuation in consumer demand, and changes in supplies of goods or services.

While most people thing of inflation as "evil", the consensus of economists is that a small (<2-3%), consistent amount of inflation is actually "good" - it allows for adjustments in the labor market during small downturns, avoiding recessions, and it avoids a monetary liquidity problem which would cripple a central bank's ability to properly adjust the monetary supply.

In addition, moderate amounts of inflation (5-10%) can also serve a useful purpose: moderate inflation reduces debt loads (as debt fails to accumulate interest faster than inflation reduces the real value of the debt), and encourages spending rather than saving.

That said, without commensurate (or at least moderately similar) rise in income levels, inflation (of any kind) does lower the standard of living of the population.

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13y ago

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