Do we need inflation?

Pros and cons of inflation [Click to view in browser](. Good afternoon subscriber, Inflation is coming, like it or not. The Fed made that abundantly clear. But why are higher prices for us a good thing? That’s a long-standing debate amongst economists. One we’re going to weigh in on today. Because who doesn’t love a little lunchtime controversy? How it’s measured Inflation means an increase in the price of something over time. The Federal Reserve looks at inflation for businesses and consumers using the [Producer Price Index (PPI)]( and the [Consumer Price Index (CPI)](. Both indexes take some base period, generally the prior year, and look at the price change in a basket of goods with different weights. These include tangible products like clothing to rent and business services. Notably, the Fed focuses on what’s known as Core CPI, which excludes food, gas, and energy. These items tend to be more volatile than others because demand doesn’t change as quickly as prices. Good inflation Every economy is made up of supply and demand- supply being labor and demand being goods and services. Theoretically, when there is unused labor in the economy, increasing prices increases spending. It also makes paying debts easier because you pay back debt with dollars worth less than the ones you borrowed. More importantly, inflation is the opposite of deflation, which can devastate an economy. Deflation comes from dropping prices, whether from reduced demand or greater productivity. That’s great for consumers but bad for business. Bad inflation The downside to inflation is pretty straightforward - things cost more. That means less real money in our pockets. Runaway or hyperinflation is an extreme example where prices skyrocket. That means the money in your bank account buys less and less, leaving you less money to spend on things like trips and video games. Our hot take - Inflation itself isn’t useful. It’s what it represents that’s important. If inflation comes from increased demand, it leads to a stronger economy. That’s great so long as it doesn’t get overheated and crash. Inflation from lower supply (like a pandemic disrupting supply), then that’s bad. That means things simply cost more for us, and there is generally no benefit to consumers. Deflation creates an interesting problem. If we see prices falling, consumers might wait for lower prices. That leads to a further drop in demand and even lower prices. Eventually, that builds onto itself and leads to a depression. It’s why prices are changing and whether they’re out of control or not. Inflation impacts everything from what we eat to the stock market. That’s why it’s important to check on various points of view, which is why we pulled together great content for you below. Power Plays [5 Best Dividend Stocks to Buy for Consistent Growth and Income]( In this article we discuss the 5 best dividend stocks to buy for consistent growth and income. 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Homebuilders are joining the fight with a surprising material- Hemp. This company is a leader in sustainable hemp-based green construction. [Read more.]( Sponsored You are subscribed to email updates from [InvestingChannel](. To stop receiving these emails, you may [unsubscribe]( now. InvestingChannel, Inc., P.O. Box 118 New York, NY 10018. Disclaimer: This is not investment advice. This InvestingChannel, Inc. newsletter is for information purposes only and opinion-based. Futures, forex, stock, and options trading are not appropriate for all investors. There is a substantial risk of loss associated with trading these markets. Losses can and will occur. No system or methodology has ever been developed that can ensure returns or against losses. No representation or implication is being made that using any of these methodologies or systems will generate returns or ensure against losses. 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