Inflation is a fact of life. One that none of us like to deal with. Rising prices are difficult to contend with, especially if you’re young and trying to get a start in life. It can feel especially stifling when you’re working really hard, and you’re just getting less and less value for your money. But there are some upsides to high inflation, mainly in that it coincides with periods of growth and innovation. Society changes a lot during periods of high inflation, and sometimes it takes a while to see the benefits of those changes. So, rather than bemoan the government policies which led to inflation around the globe skyrocketing, I figured I would focus on the upsides to inflation, in the hopes that people will know to do when prices are rising and avoid getting discouraged.
What is inflation?
Inflation is the process through which the value of assets, and therefore prices, rise with each passing year. Inflation of some form is always a constant, but you can get negative inflation (prices going down). People hate inflation for obvious reasons. When things get more expensive, it becomes harder to live. You can read more about inflation here if you want to.
Inflation (should) cause people to work harder
If prices rise and you’re just a wage-earner, you’re going to need to figure out a way to keep up, if you want to maintain the same standard of living, along with the same savings rate as other people. This means you’re going to have to either produce more at your job, take on a second job/start a business, or upskill. As an individual with little or no assets, you’re forced to work harder with inflation. This leads to many aspects of society improving, as people focus more on what’s important.
Inflation should cause people to save more
If prices are rising and you don’t have a side hustle, you have no choice but to save if you want to get ahead financially. Saving allows you to earn interest on your money through the bank. When you have a large enough nest egg you can even invest in assets such as real estate or stocks. Obviously, people aren’t perfect. Things get weird when people are struggling. But inflation will cause smart people to do their best to become savers. This is good for society in the long run. It means less degeneracy and a more stable citizenry.
Inflation should allow for the reallocation of investment resources
This one is a bit of a wild card. In order to see an increase in investment, you need to have people who are willing to invest their money. But increased inflation does usually mean an increase in the growth of asset prices. This will mean that wealthy people will be looking for good investment opportunities. The most useful and productive businesses will be funded, and people will spend less on businesses that aren’t likely to have a high return on investment. This leads me to my next point.
Inflation should decrease competition in frivolous business areas
The downside to this last point is that if too many people give up on life, deaths of despair might skyrocket. When people don’t have a purpose, they tend to drift and fall into problematic lifestyles. And yet, those who run businesses that are more frivolous will suffer and be forced to use their talents for good. Frivolous business, for the purposes of this article, are businesses that the world could do without. Think entertainment business and subscription products. There are a lot of products that people buy and simply don’t need, especially in first world countries. It’s sad that some people will lose their livelihoods, but it’s good when more people are forced to study, work in important fields, and help keep society running. A country can’t run on nightclubs, hair-salons, and Spotify clones. You know what I’m saying?
Oftentimes, inflation is bad. It’s a tax on the poor, generally speaking. This is because while the poor are forced to work their butts off for every dime they earn. Meanwhile, the wealthy own assets, i.e the mechanisms by which prices are increasing. If the cost of food increases, the wealthy win, because they own stocks in the food companies. The appreciation of that stock will more than cover their losses, and they might even get dividends as the companies in their country become wealthier and more entrenched. Inflation makes life harder, and it decreases competition in business, as the poor are too focused on working on themselves in order to succeed and get ahead. But sometimes we need more competition. Sometimes the businesses that operate in our vicinity are frivolous, and the people around us don’t spend enough time doing productive stuff. I think this is generally true across the West. Don’t believe me? Look at how much porn is out there on the internet, and how much of it is created by (North and South) Americans, especially those who speak English. The only people who make lots of porn are those with a ton of time on their hands. I think it’s a good barometer for whether or not we should be forcing people to work harder. Not everything about inflation is good, but I think some people in society need the kick in the pants that it provides in order to succeed. Inflation shouldn’t be a constant, and if it’s happening too much it might mean that your country isn’t being innovative enough. But it isn’t all bad, and giving up on life during periods of high inflation isn’t the right move.
Thanks for paying attention.
