Inflation is a scam?
People don’t like inflation, and while governments accept tight fiscal and monetary policies for at reducing inflation, they think that in the short term, these policies are worth the UN, even though they mean higher unemployment and lower revenue. Why is inflation exactly so bad?
Some commonly used claims to show that inflation is a bad thing are actually quite unrealistic, and they argue that people are deceived by inflation. When people confuse nominal and real changes, they are deceived by inflation. The welfare of people depends not on nominal variables, but on real variables.
Inflation is bad because it causes goods to be more expensive. If all nominal variables increase at the same rate, people have more nominal income and can buy goods in the same physical quantities as before. If people consider their nominal spending without considering that their nominal income is rising. It tells us how much money people have the power to buy.
The second kind of scam is more complicated. Suppose there is a marked increase in real or relative oil prices. In countries importing large quantities of oil, now the financial situation of the people will be worse.
The country as a whole has to divert the goods from national consumption to export in order to earn the extra foreign currency it will import more expensive oil. Therefore, national consumption per capita is mandatory. However, this decrease can be in two different ways.
First, this is possible if the workers do not demand a temporary wage. Increase to cover the higher costs of oil-related products. With the old monetary wage level, real wages are decreased because fewer goods are purchased now. Assume that national companies also compensate for the increase in energy costs based on oil and do not transfer these costs in the form of higher prices. There is no increase in national prices as well as national monetary wages.
Some Inflation Costs
There is uncertainty about the future. Can’t make any predictions.
Production increases because we get more because prices will increase. Consumption is not affected because the expectation is to increase inflation.
Consumption is accelerating, and inflation is entering a downward spiral.
Investors are withdrawing from investment because of uncertainty.
Investors seek trust and stability.
It disrupts revenue distribution. Inflation means no profit. it can change who profits.
In the case of inflation, high-income individuals who can change their income according to inflation ( sellers can play at prices, for example ) are profitable ones.
Workers and officers can’t change wages. Their losses are transferred to others as profits and income distribution is not fair.
The national economy is arranging according to the inflation-free supply shock. And the financial situation of people is inevitably worse.