Peter Schiff, author of “Crash Proof“, suggested 5 reasons why government would prefer to create inflation:
- Inflation makes the national debt more manageable because it can be repaid with cheaper dollars.
- In a democracy full of personally indebted voters, the government will pursue monetary policies hospitable to debtors even as it accommodates the special interests that lend to them.
- Inflation finances social programs that voters demand but avoids the politically unpopular alternative of higher taxes, allowing Uncle Sam to play Santa Claus.
- Inflationary spending is confused with economic growth, which is confused with economic health. (Of course, GDP numbers are theoretically adjusted for inflation, but that doesn’t mean much if the inflation figures are misrepresented.)
- Inflation causes nominal asset prices to rise, such as those of stocks and real estate, instilling in the minds of voters the illusion of wealth creation even as the real purchasing power of their assets falls.