Inflation is the Keynesian economist's tool for cutting wages without letting the wage-employees know that their wages are being cut. Monetary inflation (and m

Inflation is the Keynesian economist's tool for cutting wages without letting the wage-employees know that their wages are being cut. Monetary inflation (and monetary deflation) benefit those closest to the monetary authority, those with information advantage, and those with pricing power at the expense of everyone else. If you know what the Fed will do, you get richer. If you can get the new money first, you get richer. If you are holding money when old money is destroyed, you get richer. The economy works best when the growth in the money supply exactly matches the growth in economic activity. The Fed targets a positive inflation rate for several reasons, but one of them is that it makes real wages fall at a steady rate, and therefore workers become cheaper over time, encouraging hiring. If more wages were keyed to the inflation rate with automatic raises, the exercise would be pointless. Always-inflation monetary policy means that everyone who works gets a pay cut, all the time. It's a stupid accounting trick, and it only works on paper. In practice, it means that the lowest-paid workers, with the least wage-bargaining power, are constantly slipping closer to poverty. But hey, they can always find a job that is decreasingly able to pay all their bills, right? Low unemployment is not inherently bad. It is bad when you are screwing with the numbers just to hide bigger problems in your economy that may be contributing to a high unemployment rate.