The Instigator
anthonyliu1
Con (against)
Tied
0 Points
The Contender
Loubna
Pro (for)
Tied
0 Points

Moderate inflation is necessary for a healthy economic growth

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Voting Style: Open Point System: 7 Point
Started: 5/29/2016 Category: Economics
Updated: 8 months ago Status: Post Voting Period
Viewed: 372 times Debate No: 92021
Debate Rounds (4)
Comments (5)
Votes (0)

 

anthonyliu1

Con

Hi there,

I just want to take this opportunity to have an intellectual discussion about inflation. Most economic schools teach their students that moderate inflation is good for the economy but do not explain why it is necessary. I hope by this end of this debate all participants and readers can have a deeper understanding of the nature of inflation.

I'm on the side of "Con" which means that i Do Not agree that a moderate inflation is necessary for a healthy economic growth.

Following are the steps:

Round 1: Say hi and accept the challenge.
Round 2: Present your own view points.
Round 3: Counter the opposite side's arguments and strengthen yours.
Round 4: Give a short conclusion.

PS: Please try to present your arguments "eyeball friendly" by breaking down your arguments into several paragraphs. I'm new here but have seen too many unreadable debates. I want our readers to be able to read through our view points and to give constructive comments accordingly.

Thanks!
Loubna

Pro

I believe that moderate inflation is crucial for the well-being of the whole economy including all its parts whether government firms or consumers, Hope it will be an enjoyable debate. Good luck :)
Debate Round No. 1
anthonyliu1

Con

Thanks for joining, Loubna. I hope this debate is interesting and constructive for you.

Economists believe that a small amount of inflation is necessary for economic growth. It is explained that inflation is linked to economic growth through the process of inter-temporal substitution i.e substitution of money across time or simply savings now and spending later and vice versa. If there is an inflation, consumers who know that prices will rise and their money will worth less in the future would tend to spend now instead of later. This spending keeps the economy running and it is necessary to target a moderate inflation for a country's economy. Although I do agree that spending is necessary for economic growth, I disagree that inflation is necessary to motivate spending. Therefore, inflation should not be an indispensable component for economic growth.

Consumers spend for their basic needs such as food and shelter and for what they desires such as entertainments. Inflation, especially a moderate one, can be one of the many factors that consumers consider when purchasing goods and services; however, it has never been an essential factor. If an economy's inflation were to stay flat at zero, consumers would still spend money for their needs and wants. Honestly speaking, when was the last time inflation went into the top 5 reasons you made a purchase? Chances are it might not even had made to the top 10.

Many propositions think that it is necessary for a central bank or government to keep the target inflation rate to 2-3% in order to prevent deflation, which is often seen as an economic disaster. To that argument, I want to first state that there is no proof of a causation relationship between zero inflation and deflation. Even if a central bank doesn't want to economy to fall into the deflation, it doesn't mean that it needs to keep the inflation target at a positive level. It is the same as telling a person to stay full as the lack of food will cause death. One doesn't need to be full to survival but keep himself/herself NOT HUNGRY to stay alive.

Second, even if one can prove that there is a causation relationship between zero inflation and deflation, deflation does not represent an economic crisis by itself. In fact, there are countries which stay close to zero inflation or even minor deflation but can still healthily grow their economies i.e. Switzerland. Lots of people attribute Japan's 20 years lost decades as the absolute outcome of a country with deflation. However, I think the Japan case is unique as it suffers many social problems, e.g. demographic distribution, which likely have a even worse influence than deflation on its economy.
Loubna

Pro

Loubna forfeited this round.
Debate Round No. 2
anthonyliu1

Con

To be fair to my opponent, I will not present any further information this round.
Loubna

Pro

Loubna forfeited this round.
Debate Round No. 3
anthonyliu1

Con

I guess my opponent decided to drop out of this debate. Please cast your votes to me :)
Loubna

Pro

Loubna forfeited this round.
Debate Round No. 4
5 comments have been posted on this debate. Showing 1 through 5 records.
Posted by barrelcactus 8 months ago
barrelcactus
I think that this is not entirely valid. Although, inflation often helps stocks rise and the economy to develop quicker, it can create bubbles leading to a recession. Look at the real-estate crash, that was because of inflation; interest rates were so low, everyone thought money was free and they could borrow enough money for a house and not pay much interest. Case in point. THE FED SHOULD NOT PLAY AROUND WITH INTEREST RATES TO CREATE ECONOMIC STIMULUS. THE FED IS DUMB. IF A UNIVERSITY HAD RAN ECONOMIC MODELS AND HAD TOP ECONOMISTS, I WOULD BE FINE WITH MANIPULATING RATES. Let the businesses do their own thing. We should only lower rates to prevent deflation. Thus, it is not necessary but might help the economy be a little bit more pleasurable.
Posted by anthonyliu1 8 months ago
anthonyliu1
Thanks. I'm actually surprised how many people refuse to use space bar in this forum haha.
Posted by Wylted 8 months ago
Wylted
I like the eyeball friendly rule
Posted by anthonyliu1 8 months ago
anthonyliu1
Apology for the unclear definition. In the case, I shall define moderate inflation as the Fed's target of 2%.
Posted by lannan13 8 months ago
lannan13
Please define Moderate.
No votes have been placed for this debate.