I was speaking with a friend of mine this weekend and we were having a slight discussion about whether or not inflation is necessary, and whether or not it is positive for the economy that it experiences inflation.
Many governments have a goal of reaching a 2% inflation every year, and if they go below that, it feels like a bad year. Why is that? More money in the system, means more money spent, and in their opinion, that means that the economy is performing well.
Of course, when we experience higher inflation and levels around 5% and in countries with hyper-inflation, it is obviously not a good thing. But, is inflation really required and necessary?
That is the question... why do we really need it? What would happen if no more money would be printed? Isn't the money we have now enough to do what we need to do?
Have you ever thought about that?
If you own $1000 today and put it in your closet, and then find it in 10 years, it will most likely be worth way less, thus it isn't really smart to hide that money in your closet.
If you own $1000 worth of gold today and hide it in your closet, then it is likely to be worth even more in the future, though I cannot guarantee anything.
If you own $1000 worth of Bitcoin today and store it on a Ledger and hide it in your closet, then I am convinced it will be worth more in ten years from now.
Why? It is a question of inflation and inflation levels. The governments print money and inflate currencies in a way that makes it wise to spend, and stupid to store. If they would stop printing, then the current money we own would actually grow in value, and it would be more interesting to store the currency, instead of spending it. And that is what they fear, that we will stop spending, because that will make our economy look poor, and make the GDP decline. And who wants that?