We fretted about deflation, and now we are worried about what to do about its remedy, inflation. Maybe we should embrace it.

Friends, readers, and consumers, save me your jeers. I come to praise inflation, not to bury it.

I think inflation is getting a bum rap. In the US, anyway. Sure, runaway inflation in China and Brazil and India looks like it's going to cause a lot of pain to consumers—a 70% rise in the price of onions in India? (For more on soaring food prices, see this recent column.) It's also beating up investors—a 20% correction in Chinese stocks? (I wrote another recent column about the dangers of inflation overseas.)

But back here in the United States? Bring it on. We need inflation. We should open our arms and hug it to our chest like a long-lost friend. Remember that just a few months ago, we (well, the Federal Reserve mostly) were begging for the return of inflation to save us from that ol' economy-wrecker, deflation. And now we want to crush it, stomp on it like a bug? What kind of welcome back is that to our old friend?

Inflation in 2010, measured by the headline consumer price index, ran at a 1.5% annual rate. Core inflation, which omits increases in energy and fuel costs, came in at just 0.8%. That's the lowest core rate since the beginning of the index. Those are, of course, the government official numbers, which many folks, including yours truly, believe understate inflation. But let's not get sidetracked.

So, in an effort to save one of our country's longest and most important relationships, I offer this reminder: Ten reasons why we—in the United States—should love inflation:

  1. Inflation keeps deflation from the door. Deflation can kill an economy (just ask the Japanese). With prices going lower every day, consumers have constant pressure to put off purchases because "It will be cheaper tomorrow." This is no way to run a modern consumer economy. Even the Chinese know it's a bad idea to discourage consumer spending. That's why savings accounts in China pay a negative real interest rate. Every yuan you save today is worth less tomorrow.

  2. Inflation gives us the illusion that we're making progress in our work lives. And that illusion provides critical grease for the economic wheels. Wouldn't a 5% raise feel good in 2011? Wouldn't it make you feel appreciated at work? You'd start to think that tomorrow you might be able to afford (fill in the blank). Even if that 5% raise was, once you subtracted inflation, equal to 0%, it sure would feel better than the honest-to-goodness 0% raises that many workers have received in the recent past. And workers who feel better—even if as a result of an illusion—are more productive (and less likely to throw a wrench at the servers).

  3. Inflation makes consumers feel richer, so they buy more. Policymakers are still trying to get the US economy revving so that it produces more jobs. Waking up each morning knowing that your biggest asset, your house, is worth less doesn't make you want to grab that American Express card and drive to the mall. (Don't give me this stuff about nominal versus real prices. We all live in a nominal world.)

  4. Inflation makes consumers feel that saving is worthwhile. I've been trying to teach my kids to save. Do you know how impossible that is when banks pay 1% or less on the traditional passbook account? If it weren't for the free lollipop, there would be no way to get them to put a buck in at all. And we need inflation's help, not just in building a future generation of savers, but also in making the buy-on-credit-now versus save-to-buy-later decision tougher. Think there's any real incentive to save instead of just charging it when interest rates are so low? We need the whiff of inflation to push them higher.

  5. By eroding the value of money, inflation reinforces the value of concrete assets. That's important in a world that needs to do a lot of investing in finding and developing new supplies of commodities such as oil and copper. Anything that works to lower the relative cost of capital for these projects is a plus in industries with current supply/demand imbalances.

  6. Inflation is essential to ending the slump in the housing markets. Cheap mortgage money isn't enough to get buyers into the market when they're afraid that the price of the asset is about to slump. We need inflation's help to get us back to the good old days when homeowners could count on their houses being worth more (in nominal dollars, I know) every year. Inflation can make homeownership a no-lose investment again.

  7. And while we're at it, we need inflation to make debt loads more affordable long term. How? By shrinking the real value of that debt every year. Owing $450,000 on a mortgage is much easier if inflation is eroding the value of that debt every year by 3% or so. (Yes, inflation pushes up the price of credit, but as long as your own debt carries a fixed interest rate, you don't really care about the higher rates future debtors will pay.)

  8. Without inflation we have no hope of containing the US national debt. The US government needs inflation to reduce the real value of its debt even more than strapped homeowners do. As of January 20, according to the very frightening US debt clock, the US national debt was $14.1 trillion. That's roughly $45,000 in debt for every US citizen (which is almost as big a burden as the $52,000 in personal debt per citizen). That doesn't count the unfunded liabilities for programs such as Medicare. Think there's much chance that burden will be sustainable in the long term without some help from our friend inflation?

  9. Inflation is also crucial to restoring our personal and national financial discipline. At current interest rates, money is simply too cheap for the federal government and Congress to pay much attention. At current interest rates, the payment on the US national debt comes to just $3.5 trillion a year (or $11,310 a year per US citizen). That's a ton of cash, but it's not enough to crowd out spending on crucial government programs. Inflation pushes up interest rates so that we can't afford to build that lame weapons system in some congressperson's district. Then, whammo, we have a crisis on our hands. And we all know we're not going to fix this problem without a crisis.

  10. Best of all, inflation makes it easier to tell stories that begin "When I was your age…" Try this one for fun: "When I was your age, I used to pick beans in the hot sun for a whole day to earn just $1." That sounds pretty good, at least until your kids are old enough to figure out that a $1 in 1958 would be worth about $7.60 today. (Here's an inflation calculator they could use. Don't let them near it.)

Jim Jubak has been writing "Jubak's Journal" and tracking the performance of his market-beating Jubak's Picks portfolio since 1997 on MSN Money. He is the author of a new book, The Jubak Picks, and he writes the Jubak Picks blog. He is also the senior markets editor at MoneyShow.com.