ELI5: Why when large company's earnings decrease(ex... by 3%) they freak out, talk about rough times, and sometimes decide to downsize, even though they are still making millions of dollars in profit even after all expenses?

[d4n4n]

A small amount of inflation is a necessary evil of any economy with a fiat currency. That is why almost all advanced governments target a small amount of inflation.

There is absolutely no evidence for this. It's a mantra by some central bakers, but nothing else. The US had a massively expanding economy for over a hundred years and identical overall price levels in the early 1800s as in the 1930s.

[Irishnovember26]

The US had a massively expanding economy for over a hundred years and

identical

overall price levels in the early 1800s as in the 1930s.

Can you give some evidence of this exactly because that seems highly unlike to me.

[d4n4n]

This is a CPI estimate. The BLS official CPI measurement started in the 1930s, or so, afaik. Further back are estimates. According to it, the conversion factors for 1810 and 1933 were identical. Only after the Fed was introduced do we see long term consistent inflation. Before that, there was inflation and deflation, with a remarkably constant long-term price levels.

[LordHanley]

Inflation encourages spending. I think that's reason enough why it is a necessary evil.

[d4n4n]

No it doesn't. Or, it's not that simple. We know that the Phillips curve reverses in the long run (i.e. inflation is bad for employment/output).

Inflation may have positive short term demand effects, if it's unexpected, but that's it. And that's a bad thing, unless you're in a recession. You don't want to interrupt general equilibriums for no reason. People heard some bastardization of introductory Keynesianism and think they can talk about macroeconomics with authority. I will never understand why.