What GF said, steephie. But in a short way, cost of materials goes up. Cost to the consumer goes up. Consumer needs more money to buy goods so consumer needs pay raise causing cost of manufacturing to go up causing cost of consumer goods to go up causing consumer to need pay raise... It's one vicious fucking cycle.

I feared such a reply :(

I just want it all lined up by some of the learned people around here, if they are willing to tell. Just so I know what they think, instead of what my interpretation of history etc is.

Besides, we don't mind a little bit of inflation, do we?

Did not my simple little example of why inflation is bad at the most basic level explain it to you?

Draugnar: I wasn't talking about you when I siad I feared such a reply :)

As for what you said: yes, that's inflation, I get that, but that's going on already. And with everything going up it doesn't matter. You are, net change, including inflation, still taxing the population, the rich still pay more etc... It's just a bit more abstract from that point of view... So from what point of view is it a real issue?

To clarify: we cross-posted Draugnar :)

To learn more about money and why inflation is bad, I would recommend Murray Rothbard's "What Has Government Done to Our Money", which is available for free at:
http://mises.org/money.asp

Printing more moeny devalues the current money. We print more all the time as it is. But doing so on a massive scale such as you are talking about would cause double digit inflation making everyone suddenly be behind the 8 ball. If tomorrow I wake up and my current salary is suddenly worth 80% of what it was today, I have to *sell* my house and my car and downgrade my life making me depressed and less productive because of that depression. Being less productive means my company can't charge as much for my time and yet the benefits they provide me just went up so I am no longer the value I once was in a cost/benefit analysis.

So some inflation in small quantities is fine, but massive inflation causes companies to go under as they can't adjust quick enough for the new economic balance.

But what I'm saying is that your salary should go up 80% tomorrow (I know that's not completely right but it's late here and I don't know how to phrase it right now) if that's the inflation. Because that's inflation, right? Everything goes up?

And with modern technology adjusting wouldn't be too hard, would it?

I'm just playing devil's advocate, sort of, here, just until I hear what I'm looking for. Feel free to drop out when I'm starting to annoy you :)

So basically, what I'm saying is that your salary should automatically change, so tomorrow it's still worth 100% of what it was worth today...

Inflation doesn't work that way. It takes time for everything to balance and salaries are behind the inflationary curve. My salary wouldn't go up until my next review next April. In that time, I would have gone bankrupt. Remember, companies are in business to make money and only care about their employees keeping enough morale to be productive and effective. If that happened, my morale would go in the crapper and my employer, instead of ficing it, would fire me and hire someone who was willign to do the work for whatever they were offering.

Draugnar, in a system such as described by steephie, you would negotiate a automatic increase for your salary just like you negotiate your base salary now.

One of the main problems is that some people (those closer to the printing presses, economically speaking) get the inflated many before the rest. They have greatly increased buying power, and those at the ends of the system have reduced. The result is that government workers, government contractors, and bankers (those most likely to get the newly printed money first) get to spend the money when it has a higher buying power, and consequently, get comparatively more wealthy relative to the rest of the population.

Another is that price signals get all screwed up, so it's difficult to determine what's in demand and what's simply suffering price inflation - witness the various bubbles of the '90s and '00s.

^ That.

Well, I meant what AlexNesta said with ^ :P

Reading Tolstoy's post now.

But it would still be behind the curve. Do you think any company is going to negotiate a system wherein their employees get a salary increase everytime the Federal Reserve releases more money to the banks? And he is talkign about paying taxes by raising inflation. That would be 25% inflation annually. In 3 years, I would be making 200K. In 5, 300K. In 6, 375K. And it just keeps going up until the dollar is like the Yen. One Yen is worth shit, about a penny right now.

If you don't like the offer, don't take it.

The problem with negotiating automatic salary increases is that not everything is going to inflate evenly. We should be experiencing massive inflation right now because of all the money being printed since the onset of the depression, for instance, but we're not because banks are borrowing all of it then sitting on it. Not only that, but some sectors of the economy will inflate quickly (see the "tech bubble", the "housing bubble", etc.) while others not as much, and it's impossible to tell which will be which beforehand.

But in such an economy, wouldn't everything stat to inflate more evenly? Next to normal price changes of course...

Draugnar, I don't see the problem with the salary going up like that.

Also, for the many 0's you'd get on the billets, you could just start call it dallor or something, which is worth 1000 times as much or, and after some time you start to get the 5 cent coins out of the market, etc...

I know that's a bit of a weird example, just exaggerating a bit, but I think you can get what I mean there.

The easier solution is tax reform to a flat tax or a national sales tax/VAT.

In addition steephie, the more money we print, the less it's worth in overseas trading. A lot of our economy thrives on imports.

What I would like to see happen is for CEOs, CFOs hedge fund managers, owners, etc making hundreds of millions or billions of dollars a year take a pay cut and distribute the money on the lower levels and bring back more of a middle class economy. People on top are greedy for greeds sake. They will take a 5% raise while they cut jobs and send product oversea.

Tolstoy, I love the fact that by removing the power of government to tax, it will be impossible for it to use taxes as a means of restricting the individual liberty of people in a manner that discriminates against the poorer members of society. For example, a soda tax would make poor people drink less soda, while rich ones would be able to continue drinking soda. If the people think it's a good idea to limit the consumption of carbonated drinks, there should be a law that tells you how much everyone can drink.

I wasn't talking about US or UK or wherever you come from in specific, honestly. I want to know if there are situations, countries or whatever where it could work. China? They export a lot right?

AlexNesta: the poor have to pay less taxes if the rich drink the same amount of soda in that case :) Still not fair, but the poor not drinking soda still benefit in a way, right?

I'm getting the feeling I might be acting really stupid here, not sure if I'm right though :)

China alters their numbers to keep them at their competitive advantage, but they aren't realistic.

Ok... Why not? It works, doesn't it?

@Alex - So I suppose the fact that only someone moderately rich can afford a Mercedes pisses you off as well? Good. I like my Mercedes and the exclusivity of it, thank you.

No, it works for China only, steephie. It shortchanges the international community by artificially manipulating your currency's worth.

Why can't we just tax everything I don't use? Until I use it of course :)

So right now that would be everything 16+, but in a few months it would be everything 18+ :)

Draugnar, did you get the Mercedes from the government in exchange for paying taxes?