Inflation is Addictive.

Hi Plebs,

While inflation can provide an initial economic sugar like high, there are harsh consequences to becoming addicted to easy money policies and persistent rising prices. What starts as a short-term simulative boost devolves into a vicious cycle of dependency.

In inflation's early stages, businesses enjoy an ephemeral windfall. As prices rise faster than expected, they can sell products for higher profits than anticipated. This seems to allow even struggling firms to stay afloat temporarily on the unexpected revenue boon.

However, this positive effect quickly turns cyclical. Once elevated inflation endures for long enough, businesses must adapt by raising their own prices for labour, raw materials, and capital investments to maintain profit margins. Suddenly, those teetering on the brink face renewed existential threats, just at higher absolute price levels across the economy.

To delay this and create optics of sustained growth, policymakers become tempted to double down with even higher inflation. A dependence forms on relentless money printing and price increases to recreate that initial high and illusion of prosperity.

Yet with each successive inflation spike, the economy builds greater tolerance. The doses required to stimulate even modest growth become larger and larger over time. What were once sufficient money injections provide diminishing impacts, as businesses struggling under chronic rising prices.

The end stage of this inflationary addiction is a 'stagflationary' economy plagued by soaring prices amidst stagnant growth and economic malaise. Both a devaluing currency and lingering weakness emerge from perpetually chasing inflation's temporary highs.

While the initial hit of easy money masks underlying imbalances, it merely sets the stage for an insidious cycle of dependency. Businesses and policymakers grow acclimated to relentless inflation as the new normal required to achieve even modest output. The consequences are an unstable, deformed economy grappling with persistent upward price spirals and stagnation in parallel.

Cheers, and onwards with Bitcoin