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The economic story is money illusion: When government prints less money, people still keep raising their wage demands and businesses still keep raising prices for
The economic story is money illusion: When government prints less money, people still keep raising their wage demands and businesses still keep raising prices for a while. With less money around but with prices high, this causes a recession. The political story is that governments are often addicted to inflation: They get more directly from being able to spend the new money, an important factor in hyperinflation economies. Moderate inflation of 5% to 10% per year also brings in money to the government through the tax on nominal interest rates, and this can be an important source of revenue
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