inflation tax as rationale for wealth redistribution

[Derek]

I've heard a lot of arguments both on the left and the right about economics. One interesting argument I've heard recently is the concept of the inflation tax.

Inflation tax:
If the government has a monopoly on creating money, it can spend it first, before prices rise and the currency depreciates. This puts regular folks at a disadvantage, whose wages are the last to rise. Fractional reserve banking further exacerbates this problem, and even caused a similar problem before governments had a monopoly over the money supply.


Doesn't this mean that an individual, who was working hard and attempting to save, did in fact earn more purchasing power than he can wield, as the government prints new money and spends it on their friends?


Thus, the inflation tax implies wealth has already been distributed UPWARDS---so to get to a truly level playing field, wealth redistribution BACK DOWN may be necessary.

Those on the far right may argue that the playing field is already level---but I don't think it is---the inflation tax clearly makes the world tilted towards the already rich and powerful.  Those on the far right may then say, well we should return to hard money and 100% reserves so the government, nor the fractional reserve banking system can just issue credit.

Is that really realistic? I don't think so. There will always be a demand for credit---how do you get rid of the very human desire to have something now, to build a business now? How do you get everyone to want to defer their consumption and investment indefinitely?  I don't see that as being possible.

Therefore, I think wealth redistribution may actually be a good idea. After being a right winger for a long time, I can't believe I've come to this conclusion, but I haven't seen anyone think about it quite like this so I thought I'd test it out on you guys.

I'm giving Obama a chance to validate my ideas.

[thalbergmad]

There will always be a demand for credit---how do you get rid of the very human desire to have something now, to build a business now?

Well, this desire will never go away and there will always be a demand for credit, but i only hope lessons will be learned from the current "Global" crises in as much as Banks and other lenders must return to responsibility and bring back a human element to lending decisions.

I purposely pulled this part of your post, as on BBC today, an investigator rung up a loan company and told them he was unemployed and wanted to borrow £10,000 to place a bet on a horse. Amazingly, his loan was granted.

Thal

[gyzzzmo]

Is that really realistic? I don't think so. There will always be a demand for credit---how do you get rid of the very human desire to have something now, to build a business now? How do you get everyone to want to defer their consumption and investment indefinitely?  I don't see that as being possible.

Therefore, I think wealth redistribution may actually be a good idea. After being a right winger for a long time, I can't believe I've come to this conclusion, but I haven't seen anyone think about it quite like this so I thought I'd test it out on you guys.

I'm giving Obama a chance to validate my ideas.

Instead of letting stocks raise, USA government should try fixing their economy because they let it grow on air. The goverment has been promoting buying with loans for a long time wich lets the economy grow while there is no kapital basis for its growth with the current crisis as an effect.
And now they want to promote buying stuff even more by lowering tax wich only extents that giant economic bubble? Pressing more money to cover their expenses with inflation as effect?
Theyre a big laugh.

[rc]

A while ago, by observing what people around me do, I came to the idea that inflation was caused by somebody thinking they deserved more money for what they do -> charging more -> everybody else eventually adapting to this, to be able to keep the same standard of living.

Then I ran into the idea that it has to do with population: each new person needs their share of money, more people = more money = the dollar is worth a little bit less.

Now, I'm not sure at all. heh.  One thing I'm sure of, is that trying to swindle money without giving some sort of value hurts everybody.  I see this so often, it seems to be the new american dream - "something for nothing".  In Canada, the recent discussion is if all the auto sector should get a government bailout.  To me, bailouts = something for nothing. Or, something for screwing up.

[michel dvorsky]

The Fed's fund rate is close to zero. Perceived credit risk is rising.  Expectations of inflation are falling.  A lot of people are thus worried about deflation.

This is why Greg advocates PT and strong commitment (credibility)

Learn more:

https://gregmankiw.blogspot.com/2008/11/what-is-fed-to-do.html