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Inflation
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It seems that the Bank of England tries to keep inflation at 2%. Why not aim at 0%?
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No they wouldn't . Pay wouldn't increase, house values would be stagnant. There would be no interest paid on savings.
It would be impossible to borrow money.
Nobody would invest in anything because there wouldn't be any sort of return.
Unless the rest of the world was the same, we would be in great trouble very quickly - we wouldn't be able to buy from abroad.
It would be impossible to borrow money.
Nobody would invest in anything because there wouldn't be any sort of return.
Unless the rest of the world was the same, we would be in great trouble very quickly - we wouldn't be able to buy from abroad.
Not a very good idea. Japan entered a cycle of zero inflation and even went into negative inflation but it took a lot out of their economy.
http://www.iht.com/articles/1996/09/10/think.t _0.php
http://www.iht.com/articles/1996/09/10/think.t _0.php
Thanks for these answers. In reply:-
I'm still puzzled. I would have thought that the objective should be to achieve zero inflation combined with growth of the economy. This is not the stagnant economy envisaged by DZUG. Nor is it the economy in which, as ETHELsays, it would be impossible to borrow money- I would borrow �100 from Ethel, paying her say 2% interest and use it as working capital to make a profit of 10%, leaving me a net profit of 8%. As for negative inflation (R1GEEZER and ROV1200), yes in Japan this went side by side with a hard time for the Japanese economy but we don't know why - perhaps there were factors at work in Japan that don't apply elsewhere. I have the impression that there was not much inflation until the United States dropped the gold standard. Maybe we should all go back on the gold standard.
I may of course be wrong to think that the Bank of England like the idea of 2% inflation. Maybe this is just the maximum that they find tolerable. Does anyone know?
I'm still puzzled. I would have thought that the objective should be to achieve zero inflation combined with growth of the economy. This is not the stagnant economy envisaged by DZUG. Nor is it the economy in which, as ETHELsays, it would be impossible to borrow money- I would borrow �100 from Ethel, paying her say 2% interest and use it as working capital to make a profit of 10%, leaving me a net profit of 8%. As for negative inflation (R1GEEZER and ROV1200), yes in Japan this went side by side with a hard time for the Japanese economy but we don't know why - perhaps there were factors at work in Japan that don't apply elsewhere. I have the impression that there was not much inflation until the United States dropped the gold standard. Maybe we should all go back on the gold standard.
I may of course be wrong to think that the Bank of England like the idea of 2% inflation. Maybe this is just the maximum that they find tolerable. Does anyone know?
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