7 Reasons why inflation is a good thing
Let's get that money printer going!
Inflation is not always a bad thing. The FED has a target inflation rate of 2%. That is not zero.
There are several good things that happen when prices increase.
If the value of dollars increased over time rather than increase, people might hoard money more so and it would be bad for the economy.
1. Stocks go up
When there is a low interest rate and the FED is printing money stocks go up. Since most people in the workforce have a 401k this will benefit retirement investments.
2. The economy is doing good
Inflation generally means that people are willing to spend more money in the economy. The demand for products.
3. A larger money supply should lead to more spending within the economy
Banks can make loans to businesses which hire more employees and those employees can go spend more money in the economy.
4. Good for debtors
New money is less valuable than older money. Remember that inflation means that new money is losing value.
New dollars worth less are being used to pay back a loan when the dollars were worth more.
5. Your home increases in value, but your mortgage stays the same
The money is flowing and so is the demand for your home. It will increase while your loan amount stays the same.
6. Increasing wages
You can negotiate for a higher salary in times of inflation.
7. Generally some things increase, but not everything
Inflation usually effects sectors of the market more than others. Food, housing, gas, utilities. Usually a person can cut back on consumption of one in order to put more resources to the other.
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