ugh, no such unified interest exists because economic interests span across groups. The three core economic groups to be considered then are labor, industrial capital, and financial capital. For labor, the point of minimum unemployment constitutes the optimal rate of inflation. Here, labor's bargaining strength is at a maximum and therefore, wages are at a maximum also. Consequently, moderate inflation can usually be associated with low unemployment and rising real wages. Industrial capital prefers a higher rate of unemployment and a lower rate of inflation. When profits are at a maximum, unemployment is high enough to hold wages but no high enough to affect the health of the economy. Financial capital prefers zero inflation. Zero inflation means that the inflation tax on financial assets is zero, which benefits financial capital. However, financial capital does not want deflation because this would lead to default on existing debts. When wages and prices fall, debtors would not have the income to pay back their loans. It can be observed that sectional self-interest explains the current popularity of a zero-inflation policy, which is NOT a compelling foundation for making zero inflation the goal of public policy. Still, this fact has created the need to argue that zero inflation is the optimal policy. The reality is that it is hard to make a strong economic case for zero inflation, and there is a strong case that it is harmful. Pursuit of zero inflation risks increasing unemployment, with only financial interests standing to benefit. ...
