Inflation is usually considered a dangerous trend for a healthy economy, as prices for consumer goods take off and cause hardship for a country's citizens. However, according to Casey Mulligan, writing for the New York Times, a little inflation could actually help the U.S. economy.
At low levels, inflation could help increase consumer prices and wages in roughly the same amounts, leading to no damage in purchasing power and have the net effect of causing trouble for those who are owed substantial debts and helping those who owe them, Mulligan says.
However, Mulligan notes that those who are day trading for a living or otherwise making their money from investments would could be penalized by inflationary trends, since capital gains taxes are not indexed to such growth like income taxes are.
"Consider, for example, a zero-inflation economy in which homes and business normally sell for what the seller paid when he originally purchased the property. According to our tax laws, those sellers would owe no capital gains tax," he writes.
While there would undoubtedly be issues caused by inflation, the enormous number of Americans whose personal finances are being weighed down by debt could mitigate those problems, Mulligan writes.
Long-term, the outlook for the U.S. economy remains mixed. The stock market appears to have rebounded strongly from the recession, but jobless figures - while improving slowly - are still well above pre-crisis levels.
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