If there is only $1000 in the whole world and there are only 100 people in the whole world and every one of them has $10, new cars can’t sell for $11 unless someone takes a dollar from someone else. So that’s what someone does and now one person is poor while another has a new car.
If the government wants to increase prosperity so everyone can have a new car, it prints more money and soon everyone has $11 and can buy a new car and the government thinks this is really great and prints lots more money, and since everyone now has more money, government increases taxes, gives themselves raises and finances public projects.
In no time, the printing of money is so popular with the government that it just keeps on printing money non-stop and soon everyone has so much money that nobody wants it anymore because it didn’t take them long to figure out that the more dollars they had, the less each dollar was worth, and all the prices on everything just started going way up.
Inflation is not caused by increasing wages or increasing prices. Those are just the results of increasing money supply. The richer everyone is, the more they charge for their labor and the goods they produce, because everyone else is, too, and everyone needs to make a profit in order to pay for the things they need.
Inflation is caused entirely by government printing what’s called Fiat Currency, which is a fancy term for Paper Money. When you see notes in circulation with 100 Million Marks and 50,000 Pesos printed on them, who did that? Did you do that? No, your GOVERNMENT did that.
Why did your government do that? Because they printed too much money to buy stuff, the value of the money went down the toilet, no foreign nation would accept their money for goods anymore, the people still need to eat but the money is only worth a 1000th of what it was, so huge denominations are printed for the people to buy food with.
Our government is blaming inflation on the oil shortage our government caused that has driven the price of fuel up, which in turn drives up the cost of everything else. The fact is that they spent OVER $11.6 trillion dollars during 2020 through 2021 alone, and will spend over $6trillion this year. This is about $8400 more spent per person than is collected in taxes per person, so the money is either printed or borrowed.
Either way doesn’t matter because even if it’s borrowed and the national debt is increased, that borrowed money is still added into our money supply along with the printed money, the value of each dollar keeps going down and the rate of inflation keeps going up.
Governments love inflation because the less the money is worth and the faster it goes down in value, the easier it is to pay off the interest on the national debt. If I owe you a dollar but don’t have to pay you for a year, and in that year my dollar drops to a value of 50 cents because there’s now 2 dollars for every one that was around last year and I have 2 dollars now, I give you one of them and it’s like I only gave you 50 cents.
This only works for a little while. Then either people stop loaning you money or they start charging more interest on loans to you because you’re becoming a Bad Risk. Then you have to print even more money but printing is expensive so you just print bigger numbers on the notes and it’s Hello, Weimar Republic and Hello, Venezuela.