Why governments like inflationary currency

Ryan

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Quote from: MemoryDealers on May 09, 2011, 08:52:44 PM

Quote from: Ryan on May 09, 2011, 12:40:55 PM

Inflation may increase nominal tax dollars, but not real dollars. So that's really a wash.

You are forgetting about "Bracket Creep"

Bracket Creep is when inflation pushes peoples incomes into higher tax brackets.
The result is an increase in income tax rates, but no increase, or even a decrease in real purchasing power.

(Thanks to Miton Friedman for explaining this to me)

Good point in theory. In the US, tax brackets are adjusted for inflation. I don't know about other countries.

MemoryDealers

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Quote from: Ryan on May 09, 2011, 12:40:55 PM

Inflation may increase nominal tax dollars, but not real dollars. So that's really a wash.

You are forgetting about "Bracket Creep"

Bracket Creep is when inflation pushes peoples incomes into higher tax brackets.
The result is an increase in income tax rates, but no increase, or even a decrease in real purchasing power.

(Thanks to Miton Friedman for explaining this to me)

Ryan

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Inflation may increase nominal tax dollars, but not real dollars. So that's really a wash.

Some counties earn money via seigniorage (printing money, selling it at face value and taking the difference as profit). The U.S. doesn't, except in the case of coinage, which is a small exception.

However, governments often do "like" inflation:
a) Around re-election time, increased government spending can drive a short-lived economic boost. It's terrible long-term, however, and this was a major argument for separating the Fed (who controls interest rates) from the USG.
b) it deflates deficits when the debt is held in dollars.

FBI

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Quote from: tomcollins on May 03, 2011, 10:10:18 AM

Quote from: river on May 03, 2011, 10:04:20 AM

Quote from: tomcollins on May 03, 2011, 09:49:48 AM

Quote from: river on May 03, 2011, 04:43:23 AM

Governments do not like inflationary currencies (they loose power from them and they know it) .. they're just to stupid to know what real money is anymore .. they .. like most people are brainwashed idiots that don't want to think.

How do they lose power from them? It's the greatest thing ever to be able to spend counterfeited money first.

Simple .. people hate inflation .. they hate their labour and skills having no value .. they hate having to earn more for less and they (rightfully) blame it on the governments .. and no longer obey it ... so the governments loose power ............... when the people are happy with a government (see Alexander the Great outlawing Fiat for Gold/Silver/Bronse) they obey the governments commands with less resistance .. the government gets more power, and a stronger nation.

People hate taxes more. And most people are oblivious to small levels of inflation, or accept it as natural. Sure, if you go overboard, you can destroy the government. You have to steal just enough that no one cares what you are stealing. Take a few pennies from a lot of people and you become rich.

Printing more money to pay off failing banks that never pay back is stealing from people? And you say because this devalues everyone's dollar they already have to do it? I never thought people would figure this out. Not that it matters because public education is so deteriorated to a point that it is impossible gathering enough educated people to care or initiate change in the US.

tomcollins

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Quote from: river on May 03, 2011, 10:04:20 AM

Quote from: tomcollins on May 03, 2011, 09:49:48 AM

Quote from: river on May 03, 2011, 04:43:23 AM

Governments do not like inflationary currencies (they loose power from them and they know it) .. they're just to stupid to know what real money is anymore .. they .. like most people are brainwashed idiots that don't want to think.

How do they lose power from them? It's the greatest thing ever to be able to spend counterfeited money first.

Simple .. people hate inflation .. they hate their labour and skills having no value .. they hate having to earn more for less and they (rightfully) blame it on the governments .. and no longer obey it ... so the governments loose power ............... when the people are happy with a government (see Alexander the Great outlawing Fiat for Gold/Silver/Bronse) they obey the governments commands with less resistance .. the government gets more power, and a stronger nation.

People hate taxes more. And most people are oblivious to small levels of inflation, or accept it as natural. Sure, if you go overboard, you can destroy the government. You have to steal just enough that no one cares what you are stealing. Take a few pennies from a lot of people and you become rich.

river

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Quote from: tomcollins on May 03, 2011, 09:49:48 AM

Quote from: river on May 03, 2011, 04:43:23 AM

Governments do not like inflationary currencies (they loose power from them and they know it) .. they're just to stupid to know what real money is anymore .. they .. like most people are brainwashed idiots that don't want to think.

How do they lose power from them? It's the greatest thing ever to be able to spend counterfeited money first.

Simple .. people hate inflation .. they hate their labour and skills having no value .. they hate having to earn more for less and they (rightfully) blame it on the governments .. and no longer obey it ... so the governments loose power ............... when the people are happy with a government (see Alexander the Great outlawing Fiat for Gold/Silver/Bronse) they obey the governments commands with less resistance .. the government gets more power, and a stronger nation.

tomcollins

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Quote from: river on May 03, 2011, 04:43:23 AM

Governments do not like inflationary currencies (they loose power from them and they know it) .. they're just to stupid to know what real money is anymore .. they .. like most people are brainwashed idiots that don't want to think.

How do they lose power from them? It's the greatest thing ever to be able to spend counterfeited money first.

river

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Governments do not like inflationary currencies (they loose power from them and they know it) .. they're just to stupid to know what real money is anymore .. they .. like most people are brainwashed idiots that don't want to think.

TiagoTiago

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Firstbits.com/1fg4i :)

Ah, right

FooDSt4mP

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Quote from: TiagoTiago on April 28, 2011, 09:55:59 PM

Why is that better than having the money you already have become more and more valuable over time without you having to do anything?

DO NOT POST SESC LINKS

Because they've already spent more than they have. Inflation lowers the stored value of their debt,

TiagoTiago

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Firstbits.com/1fg4i :)

Why is that better than having the money you already have become more and more valuable over time without you having to do anything?

bitjet

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Quote from: asdf on April 22, 2011, 11:56:13 PM

... and they get to spend the new money too! ;-)

And when they spend the newly created money they get the full value of it. As it trickles through the economy the rest of the users do not.

asdf

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... and they get to spend the new money too! ;-)

ptd

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Governments tax all forms of income. One form they tax is income made on investments or through bank interest. However the measure of constant value they use is their very own inflating currencies. Since they are decreasing in value you must claim interest (and pay tax) on it in order to keep a constant value stored. Thus, the faster money inflates the more tax governments make.

Combine this observation with the fact that what will probably happen when governments finally run out of money is hyperinflation (me thinks they will probably shy away from default at first). As the currency inflates not only will their debts decrease in value, the tax they make will also increase.

Topic: Why governments like inflationary currency (Read 2078 times)