Inflation: The Poor Pay More

Creating new money is illegal if you do it. It is called counterfeiting. It is punished harshly. It should be. It makes everyone else’s money worth less.

Government banks (central banks) create new money when they want. They call it “stimulus”. They call it “monetary policy”. They call it this, because calling it counterfeiting would be unpopular. What it is called does not matter. It makes everyone’s money worth less.

Not everybody gets the newly created money at the same time. Those who get it first, spend it. As they spend the new money, prices go up.

There is not more stuff. Only more money. More money, chasing the same amount of stuff, makes the price rise.

Each time one person pays with the new money, another person receives the new money. They spend it. Prices go up more. After time, the new money’s effect on prices levels out.

The new money is rarely given to the poor or the working class. Often they are last to get it. They get it in the form of higher pay. There was not more workers. Only more money. More money, chasing the same amount of work. This makes the price of work (wages) rise.

But, the prices of food, gas, and housing had already gone up. They paid higher prices before their wages rose. They bought less with their pay. Now that their pay rose, they can buy what they did before.

Many feel they are now doing better. They make more money. Darn prices are higher though.

Now you have read how inflation benefits the few who receive new money first. How it hurts those who do not. If you understand how this works, you are 1 in 100. Maybe 1 in 1,000. Well done!