Two Percent Inflation Is A Lot Worse Than You Think


In addition to causing distortion in the economic structure and setting off the boom-bust cycle, monetary expansion causes a tangible negative effect in the lives of all consumers. It harms saving, eliminates the increase in the purchasing power of money that would come from economic growth, and siphons resources away from the private sector.

The deflationary effects of increased productivity can obscure the negative effects of monetary expansion, but inflation becomes much more visible when looking at relatively more scarce goods such as real estate, education, and equities. These are all things that are pivotal in our lives but severely underrepresented in CPI and becoming progressively harder for middle-class workers to obtain.

We should avoid the misconception that inflation has largely been “mild” for the past several decades and realize the full consequences that central bank policy has in our everyday lives.

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