Offer your thoughts or opinion on the input financial query or topic using your financial background.

Is inflation a good or bad thing? Why do governments want some inflation?
Sensitive topic ;) Inflation is a consequence of the mismatch between supply and demand.  In an ideal world the amount of goods available would exactly match the demand for those goods.   We don't live in an ideal world. One example of oversupply is dollar stores where you can buy remainders from companies that misjudged demand.  Most recently we've seen wheat prices rise as fires outside Moscow damaged the harvest and the Russian government banned exports. And that introduces the danger of inflation. Inflation is a signal, like the pain you feel after an injury.  If you simply took a painkiller you may completely ignore a broken leg until gangrene took your life. Governments sometimes "ban" inflation by fixing prices.  Both the Zimbabwean and Venezuelan governments have tried this recently.  The consequence of that is goods become unavailable as producers refuse to create supply for less than the cost of production. As CrimonsX pointed out, governments do desperately want to avoid deflation as much as they want to avoid hyperinflation. There is a "correct" level and that has resulted in the monetary policy called "Inflation targetting" where central banks attempt to manage inflation into a target range (usually around 2% to 6%). The reason is simply that limited inflation drives investment and consumption.  With a guaranteed return on investment people with cash will lend it to people with ideas.  Consumers will buy goods today if they fear that the price will rise tomorrow. If prices fall (as they have done during the two decades of deflation in Japan) then the result is lower levels of investment and employment as companies cut production capacity.  If prices rise to quickly (as in Zimbabwe and Venezuela) then people cannot save enough or earn enough and so their wealth is drained away. Add to this the continual process of innovation and you see how difficult it is to manage inflation at all.  Innovation can result in increased efficiency which can reduce prices.  It can also result in a new product which is sufficiently unique to allow predatory pricing (the Apple iPhone, new types of medicines, and so on). The best mechanism we have for figuring out where money should be invested and who is the best recipient of any good is the price mechanism.  Inflation is the signal that investors need to learn how best to manage their efforts. We hide from it at our peril.