Inflation, its effects and who loses

Inflation has three important effects.

1) it shuffles around societies allocation of goods and services, those who can raise their prices and wage rates gain and those that can’t lose. So, who do you think loses in this scenario.

2) it raises government revenues. Since not all taxes are indexed, more inflation increases tax revenues. So, if government benefits from higher taxes, who loses?

3) People “charge” more to lend their money. Whether that means they demand higher CD and bond rates or higher returns on stock investments, it translates into borrowers paying more so lenders can keep up with inflation. So, who do you think comprise the largest group of borrowers.

Nothing impoverishes the poor faster than inflation.

The least painful way to fight inflation is to increase production and imports.

The second least painful way is to reduce government spending.

The most painful way is to crush demand with high interest rates.

Which strategy do you see our government using?

Makes you wonder whose side is the government really on… yours or theirs?