But you need the gold to acquire the resources (and some gear, potentially) from the auction house. The more inflated an economy is, the bigger the gap becomes between the fresh 60s and the established players. On an mature server like Nordanaar, it is harder for players (especially the casual/new ones) to gather resources directly so they must deal with the ever rising auction house prices. 'Normal' game activities aren't enough to keep up with inflation and so the player feels compelled to partake in the most efficient farming methods. In turn, more money is pumped into the economy and prices rise further. It's a vicious positive-feedback cycle. This is especially true if the farms are ridicously good at generating raw gold and/or the game lacks potent gold sinks.
Is inflation bad, overall? Well, I would say that any healthy economy has some level of inflation but probably not at the level Nordanaar is experiencing. Afterall, there's a reason why people are complaining about it. It's mainly because they are struggling to keep up with the rising prices and could well quit because of it. Furthermore, the devs are implementing solutions to try and combat it so they clearly feel that it needs addressing too.
These are some interesting discussions on inflation in the WoW forums:
https://eu.forums.blizzard.com/en/wow/t ... ith/469995
https://us.forums.blizzard.com/en/wow/t ... ers/534086