[Originally published in the Front Range Voluntaryist, article by Noah Leed]
What we see as a result of monetary inflation, credit expansion and "stable prices" (as was seen in the 1920s) is a rise in income and wealth inequality. So we know the rich benefit.
And the number of renters putting at least half of their income toward housing hit a record high of 11 million people a few years ago, and twice that many are spending 30% or more of their income to cover rent, also a record high.
So with rent prices rising faster than wages, we know who's getting "mildly" harmed: the poor. But if they could suddenly afford rent more easily, that would probably indicate a drop in GDP and/or asset values, and be a result of some kind of damage to "the economy" as we know it: ever-rising nominal wealth of asset-holders.
As they did in the 1920s, central banks still foolishly look to consumer price indices (CPI) as some reliable metric to guide them in the pursuit of the rates of interest or monetary/credit expansion most "beneficial" to sustainable productive economic activity.
This is nonsensical for the simple reason that not all spending and economic activity is productive (as indicted by speculative asset bubbles, as well as by the likes of annual phony "growth" of 20% realized during WWII).
Further, such reliance on the observed CPI makes little sense because consumer prices are going to be also influenced (= pushed down) by gains in productivity. There could be upward or downward price pressure by other factors affecting global flows of goods and capital, not to mention the upward or downward price pressures that occurs with rising or falling asset prices.
There is no reason that CPI "price stability" should not at times mean a gentle decline in the prices of goods, services and commodities; especially when technological innovation or globalization means an increased availability of certain goods, services and commodities even as the time, labor, energy and other inputs into their production is being greatly decreased.