1-2% inflation is "healthy" is a trope that nobody really justifies. Perhaps its true, and it is often repeated as gospel. the "2% inflation target" was derived just from the comments of economist Roger Douglas in New Zealand who thought that sounded about right.
We welcome and celebrate deflation in technological goods (cars, electronics), apparel but are constantly warned about the dangers of deflation and why "some" inflation is good.
What is the argument for why 1-2% _deflation_ in housing, education, and healthcare would be bad?
Does nobody really justify it? The argument for inflation is pretty simple I think. It encourages everyone to do something with their money now, invest or spend.
I think that is a valid argument and makes some sense. have to toss the hot potato. The argument for the trade offs are pretty simple I think. It encourages more concentration of wealth in assets and increases the amount of malinvestment.
The question is to what degree. I am saying there's no analytical argument for 2%.
I think most people would agree that 10% or 50% inflation would be bad. But why is 2% better than 1% or 0%?. Why is 1% better than -1%? it depends on the time horizon. higher inflation today will cause more economic activity, higher inflation in the long run encourages debt and misallocation of resources.
Inflation generally encourages economic activity (spend your money before it depreciates) while deflation discourages it (save your money because it will appreciate)
Lower prices are seen as positive for as long as they stimulate higher overall consumption. If prices fall but consumption does not rise, then most economists see that as a problem.
We welcome and celebrate deflation in technological goods (cars, electronics), apparel but are constantly warned about the dangers of deflation and why "some" inflation is good.
What is the argument for why 1-2% _deflation_ in housing, education, and healthcare would be bad?