[Copernicus]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
My question would be, why is artificial inflation necessary for anything other than being able to "afford" excess spending? It seems it would be a whole lot simpler for everyone if the dollar was worth the same amount for a long time.

[/ QUOTE ]

You are introducing a value judgement with the word "artificial". What is "artificial" inflation vs "real" inflation?

I think once we get passed that the ultimate answer to what youre really asking is that moderate wage and price escalation provides a needed buffer against deflation.

[/ QUOTE ]

Well, by artifical I meant by increasing the money supply by printing money.

I guess I don't understand how wages/prices being stable is going to lead to deflation, or even why that would be bad. <font color="red">There are a number of discussions here and on the web about the dangers inherent in deflation. Dcifr would know better than I, but I have never read any economist who doesnt believe that deflation poses a greater risk to an economy than moderate inflation. Think of "stability" as walking a monetary tightrope, and then there is a shock to the system. Some shocks push you off to the deflation side, some to the inflation side. The net (available remedial action) on the inflation side is stronger, and the fall isnt as far. If your balance bar is already tilted to the inflation side, a shock toward deflation gets you upright before it pushes you off the other side. </font>

Also, shouldn't their be a global aspect to this? If all of sudden there is more of our money floating around it sure seems like that would hurt our ability to buy things not made in the U.S.

[/ QUOTE ]

I think people are trying to take the scenario too black and white. There are numerous ramifications, domestic and global, that would have some effect, and many effects would be offsetting. The point was that on a very simplistic, formulaic basis, MV=PQ will show no effect on Q if both M and P increase at the same rate and V is unchanged.