Causes of inflation: The US Government

Inflation numbers were released today that show inflation is lower than many had first suspected and better than September (last month). A previous post by myself explains inflation and traditional ways of combating it here.

A great article by Walter Williams talks about the causes of inflation. He theorizes that inflation is only caused by an increased supply of money. This, in turn, causes prices to rise. He then asks where the money comes from? The U.S. Government or more precisely, the Federal Reserve board, the organization that controls the production of money and interest rates.

He then goes on to show that the government acutally likes some inflation, because it helps it pay off debt faster. This portion is great:

When inflation is unanticipated, as it so often is, there's a redistribution of wealth from creditors to debtors. If you lend me $100, and over the term of the loan the Federal Reserve increases the money supply in a way that causes inflation, I pay you back with dollars with reduced purchasing power. Since inflation redistributes (steals) wealth from creditors to debtors, it helps us identify inflation's primary beneficiary. That identification is easy if you ask: Who is the nation's largest debtor? If you said, "It's the U.S. government," go to the head of the class.