I would say go watch
Zeitgeist.
Basically according to that Video they place the blame for the debasement of a currency (inflation) on the fact that the US Central Bank (Federal Reserve) like our SARB (South African Reserve Bank) creates money out of thin air and loans it to the Government, but here is the catch, it loans this money with
Interest attached to it. For every Dollar or Rand created there is a percentage of interest added to that. The Central Bank also controls the money supply and the supply of money over time has to increase to provide for the interest.
The two factors of
money supply and
interest cause inflation. To pay back this interest the Government must collect taxes from it's population, who in turn have to earn money from their labour, but the problem here is that this Capitalist System is fundamentally flawed as in order to repay the extra value that the interest has created the Reserve Bank has to increase the money supply and in so doing creating inflation. At the top of each Business Cycle there is an increasing amount of money chasing more or less the same amount of goods and services. Inflation.
Increasing Money Supply over time debases the value of your money.
This is what Socialism/Communism prevents, however the problem here is that the Entrepreneurial spirit created through the Capitalist System is virtually non existent in a Socialist/Communist Society as no matter how hard you work you wont get the rewards of ownership as nothing essentially belongs to you. Everything is averaged out and shared.
While Capitalism stimulates growth and prosperity for some, the big problem is that every 8 or 10 years or so the whole thing grinds to a halt (Recession/Depression) as at each instance that the Central Bank hikes the Interest Rate too much and reduces the Money Supply so as to curb the inflation they created in the first place the whole economy plays musical chairs as when the financial tune reaches it peak someone will be left without a chair to sit on (Bankruptcy). At this stage the Central Banks will reduce the Interest Rate and increase the Money Supply to try to stimulate/kickstart the economy again thus creating the start of the next Business Cycle.
One asks why does this all happen? To increase the wealth of the Economic Elite who are always one step ahead of the curve, buying low, selling high, converting their cash into fixed assets and waiting out each economic cycle. If you know what you are doing it can be very lucrative, for the rest of us it means working your whole life and hopefully retiring if you can with a meagre pension that might pay for the water and lights and give you a bit of food on the table.
Should we change this system. I think not? Perfect it, yes.
Economists would be able to give a more Dictionary Type definition of what Inflation is, but I thought I would put a more interesting spin to it.
