Inflation Robs the Poor

Most central banks concentrate on controlling inflation. They assume that they have succeeded, if inflation stays under one or two percent per year. This is not true, as they are aiming at the wrong target.

Overtime prices should gradually fall as technology and improved productivity gradually reduce the cost of things that people buy. With the growth of imported goods from China, prices should have fallen even faster, as we benefit from their cheap production costs.

The big benefit of slowly falling prices is that everyone is gradually made better off. People can increase their standard of living without having to push for wage increases or pressure the government for increases in benefits.

By keeping inflation above zero, central banks are robbing their citizens of an improved lifestyle. Gradually falling prices, benefit everyone, whereas inflation benefits those who can invest in assets that will appreciate in value. Inflation assists the rich, but hurts the poor, because their incomes are fixed. Inflation also asists the government, because it gets more tax revenue.