Title: I was just browsing through "The Economist Numbers Guide," and read the part on inflation. Here's the part that jumped out at me, which I thought the econ geeks here would find thought-provoking:<p>"Accounting for inflation is easy in a numerical sense. The ugly dragon is nothing more than an interest charge. The annual rate of inflation is compounded yearly." (p.51)<p>I've heard inflation referred to as a "hidden tax" (which it is), but framing it as compound interest charged to all dollars circulating in an economy is new to me. The beneficiary of this "interest" is the monetary issuer (the central bank) and the member banks that receive the use of this new money first, before the money is devalued due to the increase in supply.<p>Think of the Fed (or your respective central bank) as the equivalent of a big JP Morgan Chase / MBNA / Bank of America credit card, charging you interest on every dollar in your pocket every second of every day, without your permission or consent. At any time, the central bank has the power to increase the interest rate (by printing more money), and there's no way you can opt-out outside of reverting to bartering for goods directly.<p>They don't even have to bill you: your money simply becomes less valuable over time, so it takes more currency to buy the same goods. If you're like 99.999% of the human population that holds some form of fiat currency, you're paying compound annual interest to the central bank in exchange for nothing. Eventually, the currency becomes worthless - historically, every fiat currency ever created as eventually lost 100% of its value. It's less a question of "if" and more a question of "when".<p>Now I have a better idea of what Mayer Amschel Rothschild meant when he said, "Give me control of a nation's money supply, and I care not who makes its laws."
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