It would seem obvious that low inflation is good for consumers, because costs are not rising faster than their paychecks. But recently commentators have been saying that “Low inflation introduces uncertainty”. This is nonsense.
Deflation benefits low debt consumers and those on fixed incomes, because they receive a fixed number of dollars but can buy more with each dollar
During the high inflation “Eighties” I remember commentators saying “High Inflation introduces uncertainty”. This is not quite true either. The truth is that steady inflation, if it can be relied upon to remain steady, does not introduce uncertainty. Changing (fluctuating) inflation rates is what introduces uncertainty.
But there is no guarantee that if inflation is high it will not go higher… or lower. So there is the uncertainty. The only sure way to eliminate uncertainty is to have no inflation at all and that can only be accomplished by a “Gold Standard”.
Under a Gold Standard, the government owns a set number of ounces of Gold and issues currency for that amount of money. The only way to increase the money supply is to increase their holdings of Gold. This forces fiscal responsibility on the Government. [Read more...]