alt Hacker News> What does this actually mean? Every time I try to wrap my head around why it's bad e.g. for a business to make a constant profit, rather than an increasing profit;
It’s very simple.
If you make $1M in profit in a year and the following year you also make $1M but inflation was 3%, you earned 3% less money than you did the year before. The nominal profit was the same but the real profit was lower.
To earn the same real return with 3% inflation you would need to earn $1.03M the year after you earn $1M. If your profits grew less than inflation, you made less money and your company is worth less as a result.
Monetary policy people figures out that a small amount of controlled inflation that incentivizes investing is better than deflation which encourages people to hoard cash. Some people disagree with that.