We were all taught in school that 2-3% inflation is normal, and needed to balance production, employment and everything else. This is wrong.
As I have said a number of times now, inflation is a means of wealth redistribution. Why don’t we notice this?
As Hazlitt argued in his classic “Economics in one lesson”, a key error that many or most economists make is to forget about opportunities lost. In the “broken window fallacy” of Bastiat, as retold by Hazlitt, what everyone misses is that the shopkeeper could have bought SOMETHING ELSE with the money he spent fixing the window.
Likewise, what we miss with inflation is what we now can’t buy. We miss all the things that our money could and should have been able to purchase, if it had not been devalued.
Let me be clear: Wall Street bankers buy very real estates from the proceeds of profits enabled by the same mechanism that causes inflation, which is fiat money, money from nothing, money which competes with money already in existence, and lowers its value. But in the moment of creation, that part which contributes to inflation changes hands.
Instead of buying a lawnmower, we actually bought a drawer for a desk for a Congressman or a banker. We lost this money, but since the system is so complex, very few see this. But bankers–and I mean here the really big, many, many billion dollar banks that get the bailouts when they fail, and the profits when they succeed–understand this.
Here is another way of putting the gulf between Capitalism proper, and Inflationism: bankers borrow money to make-create–money; Capitalists borrow money to create real goods and services. We can only consume the latter.