The main reason economists like inflation is because it allows companies to lower real wages of underperforming workers without having to actually give them a pay cut.
It also has other advantages—it allows a central bank to set a negative real interest rate, giving them more flexibility in the usage of interest rate as a tool.
Deflation meanwhile is considered very bad. Some of the reasons wouldn’t be relevant here, but the key one is that meeting agreed on contracts becomes much more expensive than expected. If the wages you pay to your farm workers are tied to the stock market, but the income you get from selling farm produce is not, you have a real problem.
The main reason economists like inflation is because it allows companies to lower real wages of underperforming workers without having to actually give them a pay cut.
Yeah, I remember this part, and also the part where dath ilan don’t use it anyway, because instead they can just “order everyone to step to the right once” and accept those wages and people are sane enough to do so.
The main reason economists like inflation is because it allows companies to lower real wages of underperforming workers without having to actually give them a pay cut.
It also has other advantages—it allows a central bank to set a negative real interest rate, giving them more flexibility in the usage of interest rate as a tool.
Deflation meanwhile is considered very bad. Some of the reasons wouldn’t be relevant here, but the key one is that meeting agreed on contracts becomes much more expensive than expected. If the wages you pay to your farm workers are tied to the stock market, but the income you get from selling farm produce is not, you have a real problem.
Yeah, I remember this part, and also the part where dath ilan don’t use it anyway, because instead they can just “order everyone to step to the right once” and accept those wages and people are sane enough to do so.