It would seem obvious that the more we can buy with our money the better. Why should we continually want to pay more for everything?
But then some argue that people will(heaven forbid!) save their money if we have deflation. The inflationists fear That when the TV entices us with the pretty girl draped around that shiny brand new red Cadillac, we will no longer want to borrow tens of thousands of dollars to put the new ride in our garage, nor will we want the shiny brand new McMansion and hundreds of thousands more in debt to go with the brand new car. This frugality will cost people jobs.
Basically the inflationists claim that consumers must be enticed to spend to keep people employed. There is a serious problem with the inflationist's logic.
First, overconsumption is lousy for the environment. In fact if you claim to care about the environment this factor alone should trump all other considerations.
Second, the gross economic benefits of overconsumption are dubious at best. Resources that should be going to savings and building a capital base are instead squandered.
Finally, the jobs created by overconsumption engendered by inflation are not stable jobs. It cannot be good for us to depend on waste and overconsumption for our livlihood. This is why we have these boom and bust cycles.
It is pretty obvious that our country has the pedal to the metal on the inflation accelerator. We have a near zero federal funds rate. We have massive government bailouts. We have our central bank purchasing massive amounts of bad debt and putting it on their balance sheet.
Further, we have the government playing every trick in the book to lift housing prices. The Federal Reserve is buying every bad mortgage backed security they can find to keep mortgage rates artificially low. The government is backing nearly 90 percent of all new home loans. The FHA asks for a measly 3.5% downpayment requirement and then Uncle Sam is also handing out an $8000.00 credit. Basically anyone with a pulse can get a home loan backed by the federal government. The government is the housing market today.
And then we have massive stimulus designed in some measure to fight deflation.
Perhaps deflation is not such a bad thing after all and our nation's policies are completely wrong. Even squirrels know that saving is good. Aren't people supposed to be smarter than squirrels?