Some good thoughts from Dr. Boudreaux on inflation.
Deflating arguments for inflation – TribLIVE: First, empowering a monetary authority to debase money for good causes is to empower it to debase money for bad causes. Discretionary monetary policy necessarily rests in the hands of human beings with monopoly power over the supply of money. And such power is an especially intoxicating elixir.
Imagine that you could print money, legally and at your own discretion. Do you think that you’d long resist printing money for your own convenience rather than exclusively to promote the public good? Do you know anyone who could be trusted with such power?
Yet such trust is the only “constraint” on the Federal Reserve’s power.
History offers powerful evidence that this trust is misplaced. Since the Fed was created in 1913, the dollar has lost 96 percent of its value. By comparison, during the 123 years prior to 1913, the dollar’s value fell by a mere 8 percent.
Another problem with using inflation as a “countercyclical tool” is that it initially transfers wealth from creditors to debtors.