From my article:
Inflation erodes the purchasing power of our hard-earned cash, leaving us with less value over time. Dollar, the most important currency, the reserve currency of the world, inflates when US print more money.
It all resumes to this, think of USA, they pay bills in the order of billions from thin air, basically the federal reserves print money whenever they want, what grows up inflation, and we pay all that back in taxes, maintaining the cycle.
Inflation matters because it erodes the purchasing power of money over time, reducing the value of savings and income.
inflation by definition reduces the purchasing power of money. However if savings are held in the form of real assets (such as housing, land, commodities) their prices rise over time and their real values may not diminish. if wages rise with prices real wages may not fall, at least not consistently over time. the two major issues are 1) distribution effects which may be large in the short run even if they fade over time; 2) adjustment costs, price increases (not all of the same degree) require people to constantly rethink their choices (this also applies to firms) and that is a cost. High rates of inflation require a lot of rethinking, make inefficient choices more frequent (cost) and worse. This does not even count the mental pain of confusion over choices.
Inflation matters because it erodes the purchasing power of money over time, reducing the value of savings and fixed-income assets, and distorting economic decision-making.
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