Although inflation is predictable, problems still occur.
This is because there is no certain knowledge about how, where, and when the new money enters the economy. When the new money and credit arrives in the economy, they will gall in the holders such as individuals or business firms. The adjustment of price is not certain, it depends on how the holders spend the new money supply. The circulation of the money from hand to hand gives effect through the whole economic process.
The sequential change in purchasing power and price is called the Cantillon effect. In other words, it drives prices first and influences other prices. Over time, it can distort relative prices, wages, and rates of return. Economists analyzed that relative price distortion of economic equilibrium is not good for the economy. It may create an economic recession.
