Current Economic planners may argue that inflation is the not the main issue in this age of bailouts, and stimulus packages. Inflation is always a threat to any economy, and depending on how the current stimulus packages work, could either become part of the changing economy, or part of an economics textbook.
What are the Advantages of Inflation:
1. Business Growth
Controlled growth of Inflation, can become part of business growth, simply because savings are often invested, because of the net loss if they are kept in a Bank.
During times of controlled Inflation, people in the past tended to spend, as they feared prices could rise, saving on buying now, rather then paying more later.
2. Falling Debt Values
Higher Inflation eats away at the real value of a currency. This could mean that the actual value of debts decrease, benefiting indebted businesses and private individuals.
3. Higher Stock Values
Stocks bought at an earlier value, could rise in price and sold off at a higher price bringing higher profitability.
4. Rising asset Values
Values of fixed assets could rise, making some Companies more financially secure. Traditionally higher Inflation often leads to higher prices, therefore fixed assets in theory should rise in value.
Conventional Economic theory is based often on past experience, however the current economic crisis has not really been experienced before. It resembles the 1929 Wall Street Crash, but all our economies are fundamentally different, and the World is a different place to the 1930s.
We may never be sure what higher inflation could do to our economies, one reason Gold has become the choice of many Savvy Investors. We are at the crossroads of great economical change, and this change could challenge more conventional Economic thinking, especially about the effects of inflation. on an economy.