Quote from: ThEmporium on June 09, 2015, 09:31:01 AM

Inflation has some benefits too. Fundamentally, inflation gives everyone an incentive to spend and invest, because if they don't, their money will be worth less in the future. This spending and investment can benefit the economy.

This "incentive to spend and invest" is a market distortion. It leads to the "boom-bust" cycle because people are being manipulated into investing in enterprises that wouldn't otherwise be attractive enough on their own to merit investment. When these borderline enterprises eventually fail due to not enough actual resources available to see them through to completion, this causes a bust. This mechanism behind the boom-bust cycle is described very well in Thomas Woods's "Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse" in Chapter 4: "How Government Causes the Boom-Bust Business Cycle." Here is an excerpt:

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The central bank's lowering of the interest rate therefore creates a mismatch of market forces. The coordination of production across time is disrupted. Long-term investments that will bear fruit only in the distant future are encouraged at a time when the public has shown no letup in its desire to consume in the present. Consumers have not chosen to save and release resources for use in the higher stages of production. To the contrary, the lower interest rates encourage them to save less and thus consume more, at a time when investors are also looking to invest more resources. The economy is being stretched in two directions at once, and resources are therefore being misallocated into lines that cannot be sustained over the long term.

Quote from: ThEmporium on June 09, 2015, 09:31:01 AM

Inflation reduces the real burden of debt, both public and private. If you have a fixed-rate mortgage on your house, your salary is likely to increase over time due to inflation, but your mortgage payment will stay the same.

Banks take this effect into account when they set mortgage interest rates. In the absence of inflation, the market-equilibrium interest rate for mortgages would be lower.