Why is it that governments like inflation so much that they actually target higher inflation using financial policy? The answer is mostly because big business likes inflation.

Big business likes inflation because they can get large government loans at low interest rates, then they can pay back the loans at a later date with devalued dollars. They also like inflation because it promotes spending. Their logic is that if the price of an item or service will cost more in the future, consumers will buy now. Also they don't care about borrowing consumers savings anymore as they can just borrow from the government at almost no cost. This is why savers get pennies in interest payments from their savings accounts.
Therefore, governments like inflation mostly because they are so heavily influenced by corporate donors and lobbyists, so they like what corporations like.

Secondly, they also like to report low inflation in order to minimize their mandatory spending obligations on bonds and COLA and the like. To this end, the US governments BLS reported consumer price index (CPI) inflation is very different from the real life encountered inflationary effects.

Retirement is an area where the retiring worker has been seriously gouged by false inflation reporting. A recent report on the true effects of the Social Security Administrations annual Cost Of Living Allowance (COLA) calculation indicates that the actual value of social security benefits have decreased 30% between 2000 and 2020. This is because, among other things, the cost of living allowance is calculated based more on things seniors don't spend on (like child care and transportation) and less on things they do (like housing and medical costs).
The result is significant, especially to someone on a fixed income. This means that someone receiving $2,000 a month in 2000, and expecting $2000 a month equivalent today, would in fact be receiving the equivalent of $1,400 a month today.
And even at that, this is based on the CPI, not the true cost of inflation. If the true cost of inflation was accounted for then they are actually getting closer to half of the spending power that they should be getting.


The government encourages real inflation, and generally targets a goal of 2% as "good". It encourages high inflation while trying to report low inflation, in order to spend without cost.
In reality, inflation is much higher than that. The facts indicate that this country has been experiencing about 10% annual inflation over the last few decades. Ideally, 0% inflation is best. It is best for earners and savers, just not for businesses and governments.

Financial physics must be remembered as well. A nation cannot increase the money supply without a corresponding increase in the supply of goods and/or services, otherwise they are devaluing the nations currency. Just mailing out money, inherently devalues money.

It is somewhat ironic that the origin of the word "dollar" used to imply fineness and value. Per "Monetary Systems of the World" published 1895; "The dollar, derived from the German thaler, was apparently first issued by a community of the Joachims-thal in South Germany, whose pieces were of well-known purity and fixed value during periods where kings and dukes debased their coin without the slightest consideration for honesty." The modern US dollar is now nothing like the original thaler, as it has been debased and holds no fixed or stable value. A dollar used to be made of gold or silver, now they are paper.

Copyright 2021