by Frank Shostak
Mises.org
If inflation is a general increase in prices, as most experts hold, then why is it regarded as bad news? What kind of damage does it do? Most experts are of the view that inflation causes speculative buying, which generates waste. Inflation, it is maintained, also erodes the real incomes of low-income earners and causes a misallocation of resources. Inflation weakens real economic growth.
Why should a general rise in prices hurt some groups of people and not others? Why should a general rise in prices weaken real economic growth? Or how does inflation lead to the misallocation of resources? The popular definition of inflation as a general increase in prices is questionable. In order to ascertain what inflation is all about, we must go back in time when this phenomenon emerged.
Historically, inflation occurred when a country’s ruler, such as a king, would force his citizens to give him all their gold coins under the pretext that a new gold coin was going to replace the old one.