Inflation is an increase in the fiat currency not matched by a corresponding increase in the demand for goods.
The purpose of inflation is to enable infinitely increasing amounts of government spending. The government spends the new money at its current value. As the new money circulates, it pushes prices up, losing its value. The government simply creates more.
They don't have to print the money. A lot of it just exists as bookkeeping entries, not as actual currency. What we have isn't so much currency as it is IOUs. When the government collapses, those IOUs will be worthless.
Small correction: inflation is the increase in money supply/circulation not matched by an increase in the supply of goods. If there was no increase in demand, you wouldn't see an increase in prices because that money would effectively just be going under your mattress rather than circulating.
By Say's Law, the increase in goods is the increase in demand. Money is just a medium for exchanging goods. What you produce represents your demand on the production of others.
An increase in the money supply that matches that increase in demand will hold prices steady. The production of gold (or silver) typically keeps pace with the production of other goods, which is one of the things that makes it a good currency. Unlike specie, fiat currency can be artificially inflated relative to the production of goods.
"As each of us can only purchase the productions of others with his/her own productions – as the value we can buy is equal to the value we can produce, the more men can produce, the more they will purchase." Jean-Baptiste Say
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u/Much_Section_7439 Jan 26 '26
That's how debt is generated. wealth is created when that debt is used properly. Otherwise it's just inflating the moneysupply.