Economics‎ > ‎Money‎ > ‎Fractional Reserve Currency‎ > ‎


Average Inflation rises in a fractional reserve system are tantamount to theft.
If you lent me 100 units of currency in year 1 and in year 5 I gave you 90 units back, you would not be happy at all. But when a government inflates at 2% a year, effectively that is what they do.

Inflation measures

Problem with inflation measurements is they are not accurate or unbiased.

Alister Heath on inflation

  • Inflation is taxation without legislation
  • Cash holders pay while debt holders benefit
  • Inflation is stealthy, opaque and unpredictable and undemocratic
  • Those that think inflation is a good thing could be due to
    Debt burden being too high - so soft default through inflation better
    Thinking wages can be reduced when they are too high, as nominal wage stands still, so unemployment can fall (when the focus should be on productivity).
    Thinking it helps corporate profits. but this is at the expense of consumers
  • Inflation forces up interest rates
  • It reduces trust

Trevor Marshall on inflation

  • Inflation hurts those at the end of the inflation chain, which typically is the worker.
  • Infltion target is not 0, because governments fear inflation. Inflation encourags governments to borrow.
  • Inflation used as a tool by reckless governments punishes those who have saved, those who have been sensible, by reducing the value of their savings. Conversely, those who have been reckless, and have spent all their money, over borrowed and spent that as well, are rewarded.

Mark Faber on the Zimbabwe school of economics

Marc Faber on inflation

Peter Schiff on the Feds gamble

Peter Schiff on the Feds gamble

  • Printing money is inflation. The rise in prices is the consequence.
  • Things might appear to get better but that is on a nominal basis.
  • Falling prices are good, they are part of the correction.



Link271Inflation and deflation – Twin evils must look at this site further.